(Bloomberg) -- San Francisco is expected to have the worst-performing office market in the U.S. this year.
Rent and occupancy will likely drop 22% in San Francisco in 2021, the largest decline in the U.S., as technology companies embrace remote work, according to a report by Green Street.
The second-biggest drop, at 17%, will be in New York, where office towers have been largely empty for months as finance firms ride out the pandemic with most of their employees at home.
“San Francisco and New York will likely see a permanent resetting of rents as people and businesses look more toward the middle of the country for expansion,” said Danny Ismail, an analyst at Green Street. “It’s unlikely that rents and occupancy will return to a level pre-Covid over the next few years.”
San Francisco and New York, longtime hubs for tech and finance companies, have been hit especially hard by the pandemic. As tenants try to cost costs, they’re reevaluating how much space they need and looking to cheaper states to open offices.
Some cities are benefiting from the migration. Nashville, Tennessee; Charlotte, North Carolina; Austin, Texas; and Atlanta are each expected to post slight growth in rent and occupancy, according to Green Street.
Overall, demand for office space in the U.S. is expected to fall by roughly 15% through 2025 due to growing work-from-home trends, Green Street said.