All of it designed to motivate employees to leave their homes. This one includes two Michelin-star restaurants. Trophy buildings reflect a flight to quality…corporate tenants with deep pockets flocking to amenity-rich towers. Tony Park: He didn't answer, (laugh) yeah. Jon Wertheim: He didn't even answer you guys? Tony Park, Jon Wertheim and Elad Dror Real estate partners Tony Park and Elad Dror, told us they'd been eyeing that building for years, and, pre-pandemic, offered the owner $80 million. Built in 1920 and showing its age, eight empty floors with a 99-cent store on the ground level. So when you take all of those current and future declines of cash flows into account, we end up with about a 40% reduction in the value of these offices.Ĭonsider this office building near Penn Station - one of a handful of sales in the city last fall. 'Do I want to renew this space? Do I wanna vacate? Maybe I sign a new lease for half as much space.' This is what tenants have been doing for the last three years. And the reason it's just the beginning is because there's a lot of office tenants that have not had to make an active space decision yet. Stijn Van Nieuwerburgh: And this is just the beginning. Uptown at Columbia Business School, Stijn Van Nieuwerburgh, a professor of real estate, has modeled out the impact of hybrid work on pricing…and calls it a train wreck in slow motion. The reality is the price of office buildings is tanking, as much as 40% since the pandemic. Scott Rechler: This building had a lot of law firms, had some government tenants… Where IS everyone? More than 95 million square feet of New York office space currently unoccupied - the equivalent of 30 Empire State Buildings. But peek inside all this vertical real estate and there's a fundamental question. More office space than any city in the world. What is New York City without its skyline? Monuments to commerce, standing proudly shoulder-to-shoulder. We criss-crossed Manhattan, talking to players big and small, about a sector rocked to its foundations. It's enough to make you rethink the future of cities. Meanwhile interest rates have spiked to historic highs… and now the mortgage comes due: $1.5 trillion in commercial real estate loans expire in the next two years. As hybrid work hardens from trend to new normal, office occupancy rates have hit all-time lows. Two, money flowing freely in the form of loans to borrow, buy, and build. One, workers filling the buildings all week. For a century, the towers have been propped up by two pillars. economy can continue to stave off a recession? Avert your gaze from commercial real estate. Hybrid work leaves offices empty and building owners reeling | 60 Minutes 13:31

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