Roundtable Weekly
Remote Work Continues to Exert Economic Pressure on CRE and Cities as Mayors Explore Options
January 21, 2023
downtown Harford CT

As the pandemic-induced rise of remote work has lowered office demand and occupancy rates, building repurposing projects are on the rise—and the nation’s mayors are exploring ways to revitalize their downtowns and damaged tax bases. (Commercial Property Executive, Jan. 16 | CBRE Research, Dec. 2 | New York magazine, Dec. 29)

Growing Threat to Municipal Tax Bases

Miami Mayor Francis Xavier Suarez
  • The president of the U.S. Conference of Mayors, Miami Mayor Francis Xavier Suarez, above, will discuss the issue of how cities are responding to the economic impact of hybrid work arrangements during The Real Estate Roundtable’s Jan. 24 business meeting in Washington.
  • Additionally, members of the Ohio Mayors Alliance, a bipartisan group of mayors representing the state’s 30 largest cities, recently issued a report that identified remote work’s economic threat to municipal revenue as among their top concerns for 2023. (Dayton Daily News, Dec. 19)

  • A Jan. 19 editorial in the Washington Post focuses on the national problem of hybrid work for downtown areas and suggests paths to recovery, including the need to speed up permitting, rezoning and easing of restrictions. “Cities must adapt to this new reality or risk a downward spiral of falling commercial property values, lower taxes on those buildings and ghost downtowns that could lead to increased crime and homelessness,” the editorial states.

  • Employees working full-paid days from home increased to about 30 percent from 5 percent before the pandemic, according to a July 21 panel on “Vulnerable Cities Facing Work from Home Realities” from the Volcker Alliance and the Penn Institute for Urban Research.

Federal Agencies & Remote Work

image from Gentex
  • Federal government employees were recently urged to return to their agency offices by Washington, D.C. Mayor Muriel Bowser, who called on President Biden to urge more federal workers back to the workplace and convert underutilized commercial real estate spaces into affordable housing. (Roundtable Weekly, Jan. 6)

  • Mayor Bowser’s views reiterated a letter sent on Dec. 12 by The Roundtable to President Joe Biden about the ongoing, harmful economic impacts of widespread remote work on cities, local tax bases, and small businesses—and how work-from-home policies by federal agencies threaten to magnify these negative economic and social consequences. (Roundtable letter | GlobeSt and CoStar, Dec. 15) 

    • Legislation introduced in the House of Representatives last week would require all federal agencies to revert to pre-pandemic office arrangements that were in effect on December 31, 2019 and give employees 30 days to return to their offices. [Roundtable Weekly, Jan. 13 and Bill text of the SHOW UP Act (H.R. 139)]

      • Any federal order to mandate government workers back to their offices could be complicated by federal worker labor unions, which support flexible hybrid arrangements. (GlobeSt, Jan. 17 and (TechTarget,  Jan. 12)

      Meanwhile, the Federal Reserve released its “Beige Book” this week, which reports on national economic conditions. The report stated, “Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market.” Additionally, some bankers reported to the Fed that higher borrowing costs had begun to dampen commercial lending. (Beige Book national summary, Jan. 18 and GlobeSt, Jan. 20)

      #  #  #