These 6 cities could lose 40% of their commercial real estate prices by 2025

In these six towns, commercial property values are expected to drop by up to 40% by 2025.

A new report from Capital Economics says that prices for commercial real estate in six top US cities will drop a lot.

The research company focused on "major markets": San Francisco, Chicago, New York City, Los Angeles, Boston, and Washington, DC.

From 2023 to 2025, business property values in San Francisco are expected to drop by 40% to 45%, which is the most of any city.

30%–35% drops will happen in Chicago and New York, while 25%–30% will occur in LA and Washington. Values are expected to drop by about 25% in Boston.

Other cities in its "Western metros" group, like Seattle, Portland, and Denver, will see similar drops in value, but towns in the South, like Miami, Dallas, and Atlanta, will see 20% or less declines.

Fewer people need office buildings as more people work from home and the job market weakens.

This year, office-based job growth was slow in all six "major markets" except for Boston, and the company predicted that growth would "limp" to rates below 1% over the next five years.

High rents, high costs of transportation and housing, and the fact that many tech jobs are in big cities have all made office demand worse. The layoffs in the tech industry have also affected office demand in these places.

The firm said that by the end of 2025, office vacancies will likely rise to nearly 19% in all six top cities.

Other experts have warned that the commercial real estate market could be in trouble because demand for office buildings has been low since the pandemic, and credit conditions are expected to tighten, which could cause more problems for commercial real estate assets.

Morgan Stanley thinks industrial real estate prices will fall by 40%, meaning the market would drop even more than in 2008.