A staggering 19.6 percent of U.S. office space is unoccupied – the emptiest in 40 years.
According to the Wall Street Journal, drastic change has increased due to the impact of the pandemic, work-from-home lifestyles, years of overbuilding and the decline of the office market in the 1980s and 1990s.
According to Moody's Analytics, office space in major U.S. cities was unleased at the end of the fourth quarter and the number of vacant spaces increased 18.8 percent compared to a year ago.
The latest record slightly exceeded the peak recorded in 1986 and 1991 at 19.3 percent. The lowest percentage of empty offices was recorded in 1976 at about 6 percent.
After the rise in vacant office buildings in the '80s and '90s, there has been a surge in overbuilding as cheap land continues to struggle, particularly in the South, in cities like San Antonio, Dallas and Austin, Texas.
A staggering 19.6 percent of U.S. office space is unoccupied – the emptiest in 40 years
Pictured is an empty office building in the Bay Area, where San Francisco has reached a record 27.1 million square feet of empty space
In 1991, cities such as Fort Lauderdale and Palm Beach in Florida and New Orleans were the three most vacant cities in the United States.
At that time it was known that banks financed planned spaces even if there were no tenants who could occupy the buildings. Developer Bruce Eichner said the nearly 1 million-square-foot Manhattan office building he built in the 1980s is “100 percent empty.”
The oversupply of buildings and the lack of tenants to occupy them continues to impact today's space and has long been the reason why space in the U.S. is emptier than in Europe and Asia.
Many of the abandoned offices were originally built in the 1980s and previously struggled to find workers to staff them.
Aside from offices in the South, the West Coast has also joined the trend, with San Francisco seeing an increase in vacant office buildings and retail stores.
In October, Microsoft joined the Bay Area's “tech Xodus,” offering up to 500,000 square feet of its offices for sublease as the city continues to spiral into a “bad luck loop.”
The Microsoft office at 555 California Street, where offices with up to 49,000 square feet of space are available for rent
Sleeping people, discarded clothing and used needles have led to a dramatic increase in office vacancies in San Francisco
Meta and LinkedIn also sublet their office space in the city as the vacancy rate hit a record 34 percent in September as rising crime forced businesses out of the city center.
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, managing director of Jones Lang LeSalle in San Francisco, told Al Jazeera: “Almost 80 percent of the space in downtown San Francisco is office space, unlike New York or most other cities where there is more housing.”
At the same time, the city is also struggling with rampant fentanyl use and fatal overdoses. There were nearly 346 overdose deaths in the city in the first five months of 2023 – an increase of more than 40 percent compared to the same period in 2022.
The homeless population has also taken over the city, driving out businesses and even residents as a result.
Recently, Washington, DC managed to overtake San Francisco with the highest percentage of office buildings with defaulted bank loans as government employees continue to work from home in the wake of the pandemic.
According to real estate data firm Trepp, worrisome office loans around Washington reached 72 percent in the third quarter, surpassing San Francisco's 71 percent.
For comparison: the rate for the capital region was 38 percent at the end of last year.
Retail spaces are empty in San Francisco as the city reels from homelessness, drug use and the flight of major tech companies to work from home in the wake of the pandemic
According to real estate brokerage CBRE Group, Washington's office vacancy rate was 21.1 percent in the third quarter, compared to 34 percent in San Francisco
An empty office building can be seen in San Francisco, while the Bay Area hits a record 34 percent vacancy rate
According to real estate brokerage CBRE Group, Washington's office vacancy rate was 21.1 percent in the third quarter, compared to 34 percent in San Francisco.
One of the main factors is the reluctance of federal employees to return to face-to-face work. Nearly 50 percent of Washington employees worked remotely in 2021, according to census data.
In his State of the Union address in early 2022, President Joe Biden said it was time for Americans to return to work and “fill our great downtowns again.”
“That’s what we’re doing here in the federal government.” “The vast majority of federal employees will be working in person again,” he added.
In April, the White House directed agencies in an internal memo to “significantly increase meaningful in-person work in federal offices.”
According to the Government Accountability Office, more than 75 percent of available office space across 17 different federal agencies is still vacant.
Government agencies spend about $2 billion annually to operate and maintain federal office buildings and more than $5 billion annually on leases.
Washington, DC has surpassed San Francisco with the highest percentage of office buildings at risk of bank loan default
Fort Lauderdale took second place, as the number of job vacancies in the city recently fell from 28.1 percent to 18.9 percent
Some Florida cities have managed to keep their office space occupied, as Palm Beach's rate fell from 28.8 percent to 14.2 percent in 2023.
Fort Lauderdale came in second as the city dropped from 28.1 percent of job openings to 18.9 percent.
Office buildings began flooding the area in the 1980s as vacancy rates skyrocketed, but in 2023 developers began building high-end space, mostly for financial firms looking for lower tax rates and warmer weather.
“This has fundamentally changed the market,” Kevin Probel, chief executive of real estate brokerage firm JLL, told The Washington Post.