The Wrong Direction, 8
The significant decline in the valuation of primarily urban commercial real estate office properties is likely to grow worse before it gets better. Why? Because as the final Wall Street Journal article headline notes:
As their article discussed at some length, the average occupancy of office buildings in urban centers remains well below pre-pandemic levels and still is hovering only around 50%. And it seems highly likely that we might never see the kind of occupancy percentages that were common practice in the period before COVID-19 permanently altered the way (and location) we work in the United States.
According to data published in the Journal, nearly 60% of all employers are still allowing their workforce to work at home for some part of the workweek, according to Scoop Technologies. And perhaps even more importantly, the percentage of companies requiring all employees to work full time in the office has actually declined from 49% in early 2023 to 42% today. These employees on average work 2.5 days a week from home.
This perhaps permanent shift in work habits has also caused a very ominous domino effect in large urban areas that used to rely on the tax revenue and spending of employees who worked 100% of the time in an office. As real estate values plunge, so does property tax revenues, parking revenues, sales taxes (from materially lower levels of revenue at restaurants, bars and the like), income taxes collected on payroll, transit revenue and other sources. ?This chain reaction has also crushed SMEs who used to have vibrant restaurants, take out food establishments and other services that depended on office workers showing up every morning in the office. Those “good old days” I suspect are gone forever.
So suffice it to say that you blend all of these nearly depressing economic and work trends into a blender and what you end up with is a very negative outlook by Americans as documented in the first series of Harris Poll charts already incorporated into this series of articles.?
So then the next in the series of polling questions asked by Harris and the resulting responses given by Americans when asked about their personal financial status hardly come as an surprise. The chart below from the Harris data that asked “is your personal financial situation improving or getting worse” resulted in more than 50% admitting that it was worse than a month ago. And only 25% believed that it was getting any better.?
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Source: Harris Poll, May 2023.
So it is probably a safe bet that we can agree that the current state of American confidence and optimism is weak, at best. But what about how survey respondents view the future of the United States, on a societal and financial basis? I was very disheartened to learn that their view of the near term future of the United States was even more pessimistic than I could have ever imagined.
The next chart in the Harris Poll series is deeply troubling for me, as future expectations I believe drive all of us to elect to invest in the future, expand our SMEs or retract and wait for a “better day”. It seems clear to me that many if not almost all Americans have elected to “wait and see about what the future brings”, only adding additional malaise to the current weakened economic landscape in the United States today.
When asked, only 40% of Americans are optimistic about their lives over the next year and a stunning 38% are pessimistic. 80% of the Americans surveyed believe that we are in or will be in a recession in the next year. Only 20% believe that a recession in the next year will be avoided. This is very sobering data.?
Source: Harris Poll, May 2023.