Original Article By Emma Richter At DailyMail.co.uk:
A staggering 19.6 percent of US office spaces is unoccupied- the emptiest they’ve been in the last 40 years.
The drastic shift has spiked due to impacts from the pandemic, work-from-home lifestyle, years of overbuilding and the office-market decline of the 1980s and 90s, according to The Wall Street Journal.
Office spaces in major US cities weren’t leased at the end of the fourth quarter and the amount of vacant spaces has gone up 18.8 percent compared to last year, according to Moody’s Analytics.
The newest record slightly passed the highest record which was recorded at 19.3 percent in 1986 and 1991. The lowest percentage of vacant offices happened in 1976 at approximately 6 percent.
Following the surge in unoccupied office buildings in the 80s and 90s came a surge in overbuilding as cheap land, specifically in the south, has continued to struggle in cities such as San Antonio, Dallas and Austin, Texas.
In 1991, cities such as Fort Lauderdale and Palm Beach in Florida and New Orleans were the three leading cities in the US to face vacancies.
At the time, banks were known to finance proposed spaces even if there were no tenants to fill the buildings. Developer Bruce Eichner said that the nearly 1million square foot Manhattan office building he built in the 1980s was ‘100 percent empty.’
The excessive supply of buildings and lack of tenants to occupy them has continued to impact present-day spaces and has long been the reason that spaces in the US are emptier than in Europe and Asia.
Many of the deserted offices are ones that were originally built in the 1980s that previously struggled to find workers to fill them.
Other than offices in the south, the West Coast has also joined the trend as San Francisco has seen an uptick in vacant office buildings and storefronts.
In October, Microsoft joined the Bay Area’s ‘tech-xodus’ – advertising up to 49,000 square feet of their offices for sublet as the city continues to spiral into a ‘doom loop.’
Meta and LinkedIn also sublet their office spaces in the city as vacancy rates hit a record high of 34 percent in September as shops were driven out of the downtown area by heightened crime.
San Francisco – which has long been popular with tech companies – was also hit hard by the pandemic with its high density of office space.
Chris Roeder, executive managing director at Jones Lang LeSalle in San Francisco told Al Jazeera: ‘Nearly 80 percent of the space in downtown San Francisco is office space, unlike New York or most other cities, which have more homes.’
At the same time, the city has also struggled with rampant fentanyl use and fatal overdoses. In the first five months of 2023, there were close to 346 overdose deaths in the city – an increase of more than 40 percent from the same period in 2022.
The homeless population has also taken over the city and as a result, has driven companies and even residents out.
Recently, Washington, D.C., has managed to surpass San Francisco with the highest share of office buildings with bank loans at risk of default, as government employees continue to work from home following the pandemic.
Loans of concern on offices around D.C. reached 72 percent in the third quarter, unseating San Francisco’s 71 percent, according to real estate data firm Trepp.
For reference, the rate for the capital region was 38 percent at the end of last year.
The office vacancy rate in Washington was 21.1 percent in the third quarter, compared to San Francisco’s 34 percent, according to real estate brokerage firm CBRE Group.
One of the major factors is federal employees’ hesitancy to return to in-person work. Nearly 50 percent of employees in D.C. worked remotely in 2021, Census data shows.
In his early 2022 State of the Union speech, Resident Joe Biden said it was time for Americans to return to work and ‘fill our great downtowns again.’
‘We’re doing that here in the federal government. The vast majority of federal workers will once again work in person,’ he added.
In April, the White House instructed agencies to ‘substantially increase meaningful in-person work at federal offices’ in an internal memo.
More than 75 percent of the available office space at 17 different federal agencies is still empty, according to the Government Accountability Office.
Agencies spend about $2 billion a year to operate and maintain federal office buildings and over $5 billion annually in leases.
Some Florida cities have managed to keep their office space filled as Palm Beach’s rate fell from 28.8 percent to 14.2 in 2023.
Fort Lauderdale came in second as the city jumped down from 28.1 percent of vacancies to 18.9 percent.
In the 1980s, office buildings started to plaster the area as vacancy rates surged, but in 2023, developers started to build high-end spaces mainly for finance companies on the hunt for lower tax rates and warmer weather.
‘That’s become a game changer for the market,’ Kevin Probel, a senior managing director at real-estate brokerage JLL, told The Washington Post.
