JUDY WOODRUFF: There are fears
that COVID-19 cases might
spike again, and it's not clear

how long many of us will
be working from home.

Paul Solman looks at the
consequences for commercial real
estate. It's a second of two

reports for Making Sense.

NICHOLAS BLOOM, Stanford
University: I could
easily see downtown
skyscrapers in the center

of big cities falling in
value by 60, 70 percent.

PAUL SOLMAN: Economist Nick
Bloom says three factors are
about to devastate the office

skyscrapers of the world's
mega-cities, one, of
course, the COVID economy.

NICHOLAS BLOOM: This is really
looking like being, you know,
a long and incredibly painful

recession, the likes of which
I don't think anyone alive
currently has seen before.

PAUL SOLMAN: Well, maybe,
maybe not. But there's a
second factor, says Bob
Edelstein, who teaches

real estate economics: a sharp
shift to working from home.

ROBERT EDELSTEIN, University
of California, Berkeley: Just
recently, we saw a Facebook

saying they're going to have
employees work remotely forever.
Other companies are considering

that.

PAUL SOLMAN: Bad news for, among
others, shared workspace giant
WeWork. The largest private

renter of New York office
space was already hemorrhaging
money before the pandemic.

Now?

ROBERT EDELSTEIN: Do you want
to go into an office space
where three people have used

it this day and share
some facilities?

PAUL SOLMAN: Now, WeWork
says they are stepping
up sanitization, but
there's still a third

factor, anxiety about
working at close quarters.

ROBERT EDELSTEIN: You will see
people worrying about social
distance distancing within the

office market, and,
therefore, there's going to
be more space per employee.

PAUL SOLMAN: One glimpse of
this future comes via a new
video from office space services

giant Cushman & Wakefield:

NICHOLAS BLOOM: Imagine you now
need twice as much space per
person, probably three times

as much space per person in a
large skyscraper because they
were packed in like sardines

before. For the next three or
four years, people are going
to be really uncomfortable

about being in close offices,
tightly packed elevators.

DAVID KENNY, CEO, The Nielsen
Company: Anything that requires
an elevator is going to be very

hard.

PAUL SOLMAN: Dave Kenny, CEO of
the Nielsen Company, a global
market research firm, has

done the math on how long it
would take his employees in
Lower Manhattan to get to their

desks under the new CDC office
guidelines, one person at
a time in any elevator less

than six feet across.

DAVID KENNY: I calculated to,
to refill our, you know, floors
in New York, people would

be in line for over four
hours to use the elevator up
and use the elevator down.

PAUL SOLMAN: Bottom line, then,
predicts Nick Boom succinctly:

NICHOLAS BLOOM:
Catastrophic drops in value.

DOUGLAS DURST, Chairman, The
Durst Organization: Obviously,
as an owner of commercial office

space, I think he's wrong.

PAUL SOLMAN: Douglas Durst's
family business owns or manages
8.5 million square feet of

New York office space, including
One World Trade Center and
the former Conde Nast building

in Times Square, where TikTok,
the wildly popular Chinese-owned
video sharing app, just

leased seven floors.

DOUGLAS DURST: We are actively
leasing space even now. The
demand is not going away, so

we don't think there'll be
any need to reduce rents.

MARY ANN TIGHE, CEO, CBRE New
York Tri-State Region: I'm
not declaring the death knell

of offices.

PAUL SOLMAN: Superbroker Mary
Ann Tighe is New York CEO of
the world's largest real estate

services firm.

MARY ANN TIGHE: Yay, we can
all get each other on the
screen. But it doesn't tell

us a darn thing about
real-life work from home.

PAUL SOLMAN: Have there been no
fire sales of office buildings
from landlords who need

the cash?

MARY ANN TIGHE: There have been
no fire sales to date. This
is not a moment where you want

to place a valuation on
an asset, simply because
you may get an answer
you're not going to

like. And the answer may
be different a month from
now or six months from now.

PAUL SOLMAN: Take BlackRock,
CBS' iconic Manhattan
headquarters, which
Tighe's firm had been

preparing to sell for over
a billion dollars. It's
now off the market. Why?

MARY ANN TIGHE: I think people
are on pause waiting to see
what the market reveals.

PAUL SOLMAN: Bob Edelstein,
however, has evidence
that uncertainty is
actually killing real

estate deals at the moment.

ROBERT EDELSTEIN: I'm privy
to 10 recent potential
transactions. Six have
stopped negotiating.

I don't know if they will ever
negotiate again. Three of them
were negotiated and had gone

hard, which means the deposit
was accepted and would not
be returnable if the deal was

not consummated.

PAUL SOLMAN: So they put
down millions of dollars as a
deposit and then just walked

away?

ROBERT EDELSTEIN: Yes, because
they would have required many
more millions to consummate

the transaction. And
they felt, as most people
do, uncertain about the
future, and they weren't

willing to risk
these extra dollars.

PAUL SOLMAN: For dramatic
evidence of price drops, though,
look at the stocks of companies

that invest solely in office
buildings, down six times more
than the S&P 500 this year.

But current rents have been
unaffected, Doug Durst insists,
for at least one very good

reason.

DOUGLAS DURST: In the large
office buildings, the tenants
have signed long-term leases at

least 10 years or longer.

PAUL SOLMAN: Yes,
agrees Bob Edelstein.

ROBERT EDELSTEIN: It's better
to have 10-year leases, but
they may not be as good as the

paper they're written on.

PAUL SOLMAN: In fact, some
office tenants have already
tried to renege, says Mary Ann

Tighe.

MARY ANN TIGHE: Discussion
number one was, I'm not using
my space. Why am I paying rent?

PAUL SOLMAN: The response?

MARY ANN TIGHE: Show us your
2019 financials and your 2020
budget. Show us where you are

in terms of revenue. Show us
that you don't have business
interruption insurance, and

show us that you have
applied for every kind
of government help.

Once we get all that
information, we're
happy to sit with you.
We're not -- happy is an

overstatement. We will sit with
you and review the situation.

DOUGLAS DURST: Any tenant who
has difficulty, we are talking
with and trying to make sure

that they're able to
get through this period.

MATTHEW JACOBS, BLDG Partners
LLC: If the return to normal
is measured in years, and

not months, there may be an
opportunity in all of this.

PAUL SOLMAN: Los Angeles
developer Matt Jacobs'
latest project, lofts
to live and work in,

favored by artists
types, selling just fine,
despite the pandemic.

MATTHEW JACOBS: We have
visual artists. We have people
editing television programs. We

have YouTube stars.

We have had one broker ask for
a coronavirus discount, but we
have sold a number of live-work

lofts over the past
month at original market
prices, no discounts.

PAUL SOLMAN: So Jacobs
has reframed the
office space crisis.

MATTHEW JACOBS: I'm in
California, where we
have a tremendous and
sustained housing crisis.

And housing is expensive
and it's scarce.

A lot of those office
buildings that we considered
class A buildings are not
going to have tremendous

utility right now, but they
have perfect opportunity
to be converted to
housing. A well-built steel

or concrete building is a
perfect environment for housing.

PAUL SOLMAN: Including
in cities like New York,
says Mary Ann Tighe.

MARY ANN TIGHE: The downtown
Manhattan market before 9/11 had
15,000 residents. Today, it's

approaching 70,000 residents.

Many of those residents
are residing in office
buildings that have been
converted to residential

rentals. So, I do envision
that older stock will
go in that direction.

PAUL SOLMAN: What price that
older stock will fetch any time
soon, however, is enough to

worry anyone who owns
commercial office space.

This is Paul Solman.