Projection of Demand for Urban Real Estate by 2030 Paints a Gloomy Picture
The McKinsey Global Institute, an independent provider of fact-based research and analysis, created a detailed model to project future demand for office, residential, and retail real estate in global “superstar cities.” Results of the research projected that demand for office space will fall by a range of 9% to 20% by 2030 at the high among seven of the nine global cities studied with a disproportionate share of the world’s urban GDP and GDP growth — New York, Houston, San Francisco, London, Paris, Munich, Beijing, and Tokyo. Significantly fueling the trend is remote and hybrid work schedules with a “preponderance of evidence” suggesting that hybrid work is here to stay” prompting a shift in people’s behavior as many became less fearful to move away from urban cores. A second behavioral change has resulted in a decline in brick-and-mortar shopping by consumers with foot-traffic near metropolitan area stores remaining 10% to 20% below pre-pandemic levels, leading to a projected reduction in demand of retail real estate by as much as 22% depending on the city. In contrast, demand for residential space is projected to be higher in 2030 than it was in 2019 by up to 26% depending on the city.