The COVID 19 pandemic dramatically accelerated remote work trends, increasing work-from-home frequency by the equivalent of about four decades of pre-pandemic growth. Large U.S. cities face the looming trifecta of pressures stemming from remote work: falling commercial property valuations, the potential for weaker tax collections in urban cores and struggling public transit systems.
In a commentary published recently, “Could Empty Offices Lead To Empty Coffers For U.S. Cities?,” S&P Global Ratings says most large cities are equipped to meet near-term challenges if they are proactive in identifying potential revenue shortfalls and formulating timely solutions to sustain structural budgetary balance. However, significant outyear uncertainty remains, given that conditions in the commercial real estate market are still evolving.
“Despite the challenges facing commercial real estate due to return to office trends, we do not expect a broad-based decline in general obligation credit quality among large U.S. cities, particularly those with a foundation of strong credit characteristics and the capacity to proactively manage emerging risks,” says S&P Global Ratings credit analyst Scott Nees. For those facing significant disruption, several potential stabilizers could either blunt or slow the direct budgetary spillover from return to office stagnation, which we expect will create some room for budgetary accommodation.
This report does not constitute a rating action.
The report is available to subscribers of RatingsDirect at www.capitaliq.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (212) 438-7280 or sending an e-mail to [email protected]. Ratings information can also be found on S&P Global Ratings’ public website by using the Ratings search box located in the left column at www.standardandpoors.com.