Remote Work and the Intracity Dynamics of Office Markets: Evidence from Paris

This paper examines the intracity effect of Working From Home (WFH) on office markets. I develop a municipality-level WFH exposure indicator in the Paris metropolitan area and leverage on the Covid-19 shock as a natural experiment to implement a difference-in-differences strategy. Using a unique dataset on commercial real estate, findings reveal a significant and growing rise in durable office vacancy due to remote work, even in high-quality buildings, with effects more pronounced in areas with larger firms and farther from the city center. This indicates a growing mismatch between supply and demand, along with a preference for central locations, which become relatively more affordable through office downsizing. Furthermore, the paper sheds light on the negative externalities of sustained office underutilization. In areas most exposed to WFH, prices and transactions decline substantially, suggesting market anticipations of persistent changes. I also find evidence of spillover effects, with employment losses in nearby retail and restaurant sectors.