Has the Rise of Remote Work Diminished the Value of Commercial Office Real Estate?

Gupta, Mittal, and Van Nieuwerburgh (2022) examine how the shift to remote work has affected the value of commercial office real estate. They ask whether work-from-home practices have permanently reduced office demand, rents, and building values. They analyze lease-level data from CompStak covering 105 U.S. office markets from 2000–2023, combined with office occupancy data, firm remote-work policies, and REIT returns. They find that remote work caused large declines in lease revenues, occupancy, and rents, leading to major valuation losses. Long-run office values fell by about 46 percent in New York City and by roughly $557 billion nationwide, with lower-quality buildings hit hardest.

Why This Article Was Selected for The Policy Scientist

This article addresses a policy issue of broad and immediate importance: how a persistent shift toward remote and hybrid work reshapes urban economies, financial systems, and local public finance. Gupta, Mittal, and Van Nieuwerburgh have written extensively on remote work and real estate markets, and this study consolidates that agenda by directly linking work-from-home practices to asset valuation. The timing is critical, as cities, lenders, and governments are still adjusting to post-pandemic labor patterns. The paper’s lease-level data are unusually rich and well suited to measuring cash-flow risk, and the findings plausibly generalize to other office-dense metropolitan areas. The modeling and empirical work are rigorous, though future research would be strengthened by quasi-experimental or causal identification strategies.

Full Citation and Link to Article

Gupta, A., Mittal, V., & Van Nieuwerburgh, S. (2025). Work From Home and the Office Real Estate Apocalypse. Forthcoming in American Economic Review. Available at https://ssrn.com/abstract=4124698 or http://dx.doi.org/10.2139/ssrn.4124698 

Central Research Question

This article asks how the widespread adoption of remote and hybrid work has altered the economic value of commercial office buildings. The authors focus on whether work-from-home represents a temporary shock or a persistent structural change, and how that distinction affects office rents, occupancy, cash flows, and asset valuations. The core question is not simply whether office demand declined after COVID-19, but how those declines propagate through long-term leases, renewal decisions, vacancy dynamics, and discounting to generate large and potentially lasting valuation losses. By framing the problem as one of asset pricing under uncertainty, the paper seeks to quantify how remote work reshapes office markets during a prolonged transition to a new equilibrium.

Previous Literature

The paper builds on several strands of research. First is the rapidly growing literature documenting the rise and persistence of remote work, including survey-based and firm-level studies showing that hybrid and remote arrangements are likely to endure. Second is urban and real estate economics research examining how changes in commuting, location choice, and agglomeration affect land use and rents. Prior work has shown shifts in residential demand and weakened central business districts, but has largely avoided direct valuation questions. Third is the finance literature on commercial real estate as an asset class and on “stranded assets,” where technological or institutional change erodes asset values. The authors’ contribution is to integrate these literatures by explicitly linking remote work adoption to lease-level cash flows and then to office valuations using an asset pricing framework, something earlier studies had not done in a comprehensive way.

Data

The analysis relies on unusually detailed and comprehensive data. The core dataset is lease-level information from CompStak, covering office leases across 105 U.S. office markets from 2000 through 2023. These data include rents, lease terms, square footage, building characteristics, and tenant information, allowing the authors to separately analyze prices and quantities. The lease data are complemented by city-level vacancy rates from Cushman & Wakefield and physical office occupancy measures from turnstile data. To measure remote work exposure, the authors use firm-level return-to-office policies from Scoop and data on remote job postings from Ladders. Public market information from office-focused REITs is used to discipline valuation assumptions. Taken together, these datasets allow the authors to connect firm work policies, leasing behavior, market-level outcomes, and asset prices in a consistent way.

Methods

The empirical analysis begins with descriptive and regression-based evidence documenting changes in lease revenues, rents, occupancy, and new leasing activity before and after 2020. The authors then link variation in these outcomes to firm-level, industry-level, and city-level measures of remote work intensity. While this component relies on observational relationships rather than causal identification, it establishes strong and consistent associations between remote work and office demand. The paper’s central methodological contribution is a structural asset pricing model of office valuation. The model treats office buildings as portfolios of long-term leases subject to renewal risk, vacancy risk, rent growth risk, and supply adjustments. Remote work is modeled as a permanent shift that generates a multi-year transition period with depressed cash flows. The length of this transition is uncertain and inferred from observed REIT returns. This framework allows the authors to translate observed leasing shocks into estimates of value destruction under different scenarios.

Findings/Size Effects

The results show large and economically meaningful effects. Between 2019 and 2023, real lease revenues declined by about 15 percent nationwide, driven by both falling rents and reduced occupied space. These declines are strongly correlated with remote work adoption: firms allowing more days of remote work reduced office space by substantially more, and cities and industries with higher remote exposure experienced larger drops in occupancy and rents. The valuation implications are dramatic. The model implies a long-run decline in office values of roughly 47 percent in New York City and a nationwide value loss of about $557 billion. Outcomes vary by building quality: newer and higher-quality buildings experienced smaller rent declines, consistent with a “flight to quality,” while lower-quality offices face much larger risks of becoming stranded assets. The analysis also highlights substantial uncertainty, with downside scenarios implying even larger value losses if the transition persists longer than expected.

Conclusion

The paper concludes that remote work constitutes a major structural shock to the commercial office sector rather than a short-lived disruption. By combining detailed lease data with a valuation model that accounts for long-term contracts and uncertainty, the authors provide a coherent explanation for why office values can fall sharply even when many leases remain in force. The findings have implications beyond real estate markets, including financial stability and local public finance, given the exposure of banks and cities to office property values. While the analysis does not rely on causal inference designs or randomized experiments, it offers a transparent and disciplined framework that future work could strengthen by exploiting policy variation or quasi-experimental shocks. Overall, the study establishes a benchmark for understanding how labor market changes translate into asset value adjustments in urban economies.