Behavioral changes sparked and accelerated by the pandemic, especially when it comes to where and how people work, threaten to have a “severe and lasting impact” around the globe that is estimated to wipe out some $800 billion in office value in nine cities by 2030.

The total value of office space in New York, San Francisco, Houston, London, Paris, Munich, Tokyo, Beijing and Shanghai is expected to decline 26%, translating to that $800 billion estimate when adjusted for inflation, from 2019 to 2030 in a so-called moderate scenario, according to an estimate by McKinsey Global Institute, a research arm of the consultancy McKinsey & Company.

In a severe scenario, the value slumps by an even bigger 42% during that time, McKinsey projected, adding the fallout on office values could grow if compounded by rising interest rates and if financial institutions decide to more quickly reduce the prices of property they finance or own. McKinsey said its estimates are already more conservative than some other studies.

Even as the office utilization rates in the cities examined have improved since the start of the pandemic, office attendance is still 30% below pre-pandemic norms on average with workers visiting offices about 3.5 days per week, McKinsey said. The decline comes after the pandemic, layoffs and economic uncertainty led to the increased use of hybrid work patterns of employees working just some days in the office.

With hybrid work here to stay, the “ripple effects” are “substantial,” said McKinsey, which polled 13,000 full-time office workers in the United States, United Kingdom, Japan, China, Germany and France in October and November as part of the study.

McKinsey described the nine “superstar” cities as having a “disproportionate share” of the world’s urban gross domestic product and its growth.

“Untethered from their offices, residents have left urban cores and shifted their shopping elsewhere,” according to the 88-page report, titled “Empty Spaces and Hybrid Places: The Pandemic’s Lasting Impact on Real Estate.”

The study found that New York’s urban core lost 5% of its population from mid-2020 to mid-2022, and San Francisco’s lost 6 percent, while London’s was down by 7% from mid-2020 to mid-2021. At the same time, urban vacancy rates have shot up with foot traffic near stores in metropolitan areas remaining 10% to 20% below pre-pandemic levels.

Still, there are no guarantees that current trends will continue. Stabilizing economies and quickly changing attitudes could cause the current projected trajectory in office use to change.

Even so, in the nine cities’ urban cores, home prices also have increased more slowly than in the suburbs and other cities as a result of the sharp rise in the percentage of office and retail space that’s vacant.

McKinsey said the study comes “during a time of exceptional macroeconomic uncertainty,” where inflation and interest rates are high; fears of a recession are mounting; and stress in the financial system has been making headlines. All those variables may further affect real estate demand and value.

“What is certain is that urban real estate in superstar cities around the world faces substantial challenges,” according to the study. “Those challenges could imperil the fiscal health of cities, many of which are already straining to address homelessness, transit needs, and other pressing issues.”

The findings echo others that have pointed to the challenges facing the office sector in particular as well as retail, restaurants and other businesses that are dependent on downtown workers.

In New York, the largest U.S. commercial real estate market, Manhattan’s office visitation rate, after having improved from the year-earlier level, has “stalled” in recent quarters, according to a study published in May by the Real Estate Board of New York. The industry lobbying group’s other studies have found office-dependent retail corridors are hit harder than areas more dependent on residential neighborhoods.

In a separate study updated in May, titled “Work From Home and the Office Real Estate Apocalypse,” New York University and Columbia University researchers estimated a $506.3 billion decline in the value of U.S. office stock between the end of 2019 and 2022, including $69.6 billion for New York and $32.7 billion for San Francisco.

“Office and retail space have been facing a reckoning as a result of the pandemic,” Aditya Sanghvi, a senior partner at McKinsey, said in the McKinsey report. “In particular, lower-quality buildings in less attractive locations are no longer competitive and face obsolescence as people come to the office less and businesses consolidate space.”

With the woes facing the commercial property market led by the office sector, especially against the backdrop of higher interest rates that have seized market and lending activity, defaults on loans tied to office and some other properties are expected to increase.

Credit-ratings firm Fitch said Wednesday in a report that “commercial real estate office loan performance will continue to weaken as market pressures build.”

Fitch added that “we maintain a ‘deteriorating’ outlook on the U.S. office sector for 2023 given higher interest rates, a tighter lending environment and a secular decline in office demand.”

Office loan delinquencies in Fitch-rated U.S. commercial mortgage-backed securities transactions are expected to double to between 3.5% and 4% of total office loans at the end of this year from 1.8% in May as more maturity defaults occur, Fitch said, adding that office properties, especially “lower quality urban office” buildings, will continue to see “negative net operating income growth.”

Almost $1.4 trillion of commercial mortgages are set to mature in 2023 and 2024, according to a Moody’s Analytics study published in May.

Only 30% of $1.15 billion in fixed-rate office loans on the commercial mortgage-backed securities market that matured through April this year were paid off, the sister company to ratings firm Moody’s Investors Service said. It added that over 60% of the remaining $7.8 billion upcoming maturities in 2023 may have difficulty refinancing.

At the recent CRE Finance Council’s mid-year annual conference in New York, lenders and investors also agreed office, with the exception of those benefiting from the so-called flight to quality, was one sector they were getting more cautious about when it comes to opening their wallets.

On the bright side, the challenges facing the office market in major cities present opportunities, according to McKinsey’s study.

“Developing mixed-use neighborhoods, constructing more adaptable buildings, and designing multiuse office and retail space can help protect cities’ vibrancy,” McKinsey said.