Office Rebound and AI

Random Saul Fact: Here’s my office setup, and I’m putting the finishing touches on this week’s email.

The same AI companies fueling the office rebound are building the technology that will make traditional offices obsolete.

I spent an hour with three different LLMs, pitting them against each other to dig into real office demand data.

My timeline based on that exercise:

Short-term (2-3 years): Office is bright. Strong absorption in tech hubs.

Medium-term (3-5 years): Inflection point. AI shifts from helping to replacing workers.

Long-term (5-10 years): Steep decline. Offices become occasional collaboration hubs.

Prime Real Estate

“But prime downtown real estate always holds value.”

Not necessarily.

Bank branches, malls, travel agencies were blue-chip real estate. Technology made them obsolete.

My take: there’s probably a 2-3 year window to ride the office rebound and exit before the major decline starts. Before the reality of real estate changes.

Conclusion

Offices are currently experiencing a rebound, but AI advancements may lead to a shift from assistance to replacement of workers, potentially causing a steep decline in office demand over the long term. Even prime real estate isn’t immune to technological obsolescence, and there might be a limited window to capitalize on the office rebound before a major decline begins.

Therefore, understanding the implications of AI on office demand is crucial for making informed investment decisions in the commercial real estate market. Keep an eye on the trends and prepare for the future.

Want to learn more about commercial real estate? Check out the commercial property rescue.