(Bloomberg) -- US office buildings are unlikely to regain their peak pre-pandemic values until at least 2040 as demand for desk space weakens, according to a forecast by Capital Economics.

Values are expected to plunge 35% from the peak by the end of 2025 and take an additional 15 years or more to recover as hybrid and remote work reshape real estate, the London-based research firm reported Thursday. It’s a trend that mirrors the collapse of shopping malls as e-commerce grew.

“Demolitions and conversions of the worst assets may partially counteract the impact on valuation-based indices,” economist Kiran Raichura wrote. “But ultimately landlords will have to bear those costs, so the road ahead for office owners is set to be an arduous one.”

Major institutional investors, including Brookfield Corp. and Blackstone Inc., have already defaulted on some office buildings, choosing to stop loan payments rather than spend more on money-losing properties.   

About $18 billion of office buildings were considered distressed at the end of March, MSCI Real Assets said in a report Thursday, estimating almost $43 billion of offices are at risk of default.

Read more: Distressed US Commercial Property Assets Swell to $64 Billion

Office usage is only about half what it was before the pandemic, according to badge-swipe data from Kastle Systems. Available space for lease in cities such as San Francisco and Atlanta has climbed to 30%, the brokerage Savills reported. 

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