It was the nicest office in which I’ve ever worked. Carmelite Street, in London, was a small street that connected Fleet Street, famous as the one-time home of the British press, and the Victoria Embankment. In summer, a short walk along the Thames was the perfect way to clear one’s head before returning home.

But Carmelite Street was very definitely part of London’s business district and was utterly deserted by around 8 pm. An effort to turn one building into upmarket apartments targeting bankers who wanted to be walking-distance from their offices flopped. Hardly surprising because there were no shops or other entertainment anywhere nearby. In the city’s bustling heart, this was a zone of emptiness and silence when evening fell.

Around this post-Covid world, though not in India, a massive commercial real-estate crisis is building. Many companies are deploying a mix of gentle persuasion and not-so-gentle arm-twisting to bring their employees back into newly refurbished offices. They’re returning but so far not enough of them. A new survey by Australian consultancy XY Sense of the UK, US, Hong Kong and Singapore found 36 per cent of cubicles and desks are never occupied. Another 29 per cent are occupied for less than three hours daily and only 14 per cent are occupied for more than five hours a day.

In London, the worst hit is Canary Wharf, always a long commute from most parts of the city. Similarly, La Defense in Paris was smartly modernistic but a considerable distance from the city’s vibrant heart. Now Canary Wharf, which bankrupted its builders, the Reichmann brothers, is emptying out. HSBC, which once wanted the giant trading floors in Canary Wharf’s high-rise buildings, has left and others are said to be following. Every building now has empty space on offer.

An even more dangerous situation is brewing in smaller US cities like Atlanta, Indianapolis and Baltimore. In Indiana, for instance, tech giant Salesforce is slashing its office space by 25 per cent. Professor Stijn Van Nieuwerburgh, at Columbia’s Graduate School of Business, is one of the academics who coined the grim term The Urban Doom Loop to describe a cycle of collapse in which companies slash office space, buildings’ prices tank, builders default on loans and downtowns become ghost towns. Van Nieuwerburgh calls the phenomenon a “train wreck in slow motion”.

The same scenario is playing out in countries like Canada. Cities like Toronto, Calgary and Halifax are panicking as workers desert office spaces. By contrast, there’s a housing shortage in many Canadian cities and rents are soaring. So, the Canadian government is hoping to make the best of a bad situation and is offering funding for renovations that will turn offices into residential spaces. It’s hoping to turn business districts into neighbourhoods but that’s a workaround that’s a challenge to pull off.

Remote working

The empty spaces around the globe may fill up once again in coming years. Many corporations have become disenchanted with the effectiveness of remote working. Even Zoom created a stir when it ordered its employees back to office. Some employees too, have tired of solitary working and being unable to have short, face-to-face consultations. Nevertheless, there are many who’ve become accustomed to juggling work and other activities and who are resisting a return to 9-to-5 drudgery.

It will take another year or so for the picture to become clearer. But many are betting hybrid working will be the future. There are, however, certain sectors like banking which are demanding a full-time return to work.

India is the great exception to the rule. Here, office space demand is still holding firm but it’s being kept buoyant by the co-working sector. Co-working’s share of office leasing shot up by 23 per cent in FY2022-23. In Pune, says real estate consultancy Anarock, co-working accounts for 40 per cent of demand. By contrast, regular office leasing is down 12 per cent.

Will the Urban Death Loop work like an earthquake on the economies of the developed world? Cities could find their tax revenues drying up. Small businesses like restaurants and sandwich bars that sprouted in the business districts, could collapse.

Our cities were built on the premise that we’d always be commuting between home and office and our metro lines and roads have been created to take us between these two points. If everything changes, will half the economies around the world collapse? We have time to adjust to a new world and work out its economics. But we could be moving into perilous times.