America’s central business districts are ghost towns. Look no further than New York City, where office leasing fell to its lowest this century and only one in 10 office workers made their way back into Manhattan after last year’s lockdowns.
Once the vaccine is fully rolled out, we’ll find out what the future of remote work is. To get a sense of where we’re headed, Fortune conducted a survey of CEOs in collaboration with Deloitte. We received over 100 responses from executives between January 5 and 13. We asked CEOs similar questions in our September 2020 survey—so we can see if CEOs are changing their minds.
In our September 2020 survey, 76% of CEOs told Fortune their company would need less office space in the future. The number is so high one might assume it’s an outlier. But in our January 2021 survey, 75% of CEOs still say they’d need less office space in the future.
Meanwhile, only 4% of CEOs say their company will need more office space in the future. That figure was 6% in our September 2020 survey.
Remote work may very well outlast the pandemic.
Of course, that’s bad news for commercial real estate—which is already suffering from mass closures of everything from hotels to retail storefronts—and the banks that hold their loans.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told Fortune that commercial real estate loans (CREs) are the most vulnerable financial sector with the potential to cause a shock to the financial system.
“Thousands of small businesses have already or will go under … That rolls up into the commercial real estate market and rolls up into the banking sector,” Kashkari says. Shuttering office spaces would only worsen the issue.
Private equity firms are already raising funds in anticipation of a wave of distressed CRE sales. By 2025, CoStar forecast that distressed sales could top $650 billion. But if remote work doesn’t go away, that figure could even be higher.
*Methodology: Fortune surveyed CEOs in collaboration with Deloitte between Jan. 5 to 13. A total of 137 CEOs (86% in the U.S.) responded to the survey, which was sent to Fortune CEO Community. Among those, 104 fully completed the survey. That Fortune CEO Community includes Fortune 1000 CEOs, Global 1000 CEOs, and CEOs who attend Fortune conferences.
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