Agreed. Very hard to estimate that effect. With corporate real estate, it is inherently local (you cannot export an office) so the question is about the swings in vacancies.
Have some markets seen ~15% vacancies before? Yes, corporate real estate is very cyclical, no-one builds for years, and then the market adds 40-50% in a few years. But when it gets to 30-40% then you are probably looking for examples outside the US...and SF will be the worst-hit market, others should be less.
But...the world will move on, write down the value of property, assign losses, pay off remaining creditors, the world moves on...I don't think anyone could say a fault of the last ten years has been that shareholders/creditors were forced to swallow too many losses. The strength of a capitalist economy is that losses can be assigned quickly, and everyone moves on...in theory.
You're right, things will move on, and I am not (personally) all that worried. Nor are the creditors who can afford to eat a loss.
My concern is more about the ripple effects. Many low-skilled workers rely on service work, and servicing corporate real estate is a real industry (janitorial services, managerial duties, parking lot attendants, plumbers, even construction). They are already having a pretty hard time of it, and if this industry vanishes, "moving on" may mean going out on the streets. San Francisco, Los Angeles, New York, and San Diego have enough homeless already.
> I wouldn't be surprised to see established companies expand on cheap real estate and start offering closed offices to employees.
As much as I like closed offices, I think that companies that want to save money still won't offer them. The cost of closed offices isn't just more square footage; they also incur construction costs that open office space don't: walls, doors, their own heating/cooling/ventilation ducts, their own lighting and electrical wiring, etc. And an office layout with closed offices is more expensive to modify.
Warehouses is another one (in addition to coworking). I am not sure how easy it would be to rezone (some places have an industrial category that is separate from office/residential) but being able to fulfill orders out of city-centres is obviously attractive (but debt and equity would go to zero then, you could probably maintain prices with coworking but warehouse space is going to be a 90%+ loss).
Have some markets seen ~15% vacancies before? Yes, corporate real estate is very cyclical, no-one builds for years, and then the market adds 40-50% in a few years. But when it gets to 30-40% then you are probably looking for examples outside the US...and SF will be the worst-hit market, others should be less.
But...the world will move on, write down the value of property, assign losses, pay off remaining creditors, the world moves on...I don't think anyone could say a fault of the last ten years has been that shareholders/creditors were forced to swallow too many losses. The strength of a capitalist economy is that losses can be assigned quickly, and everyone moves on...in theory.