It’s almost as if you could see tumbleweeds rolling down corridors that used to be filled with water coolers, document shredders and errant staplers.
Although the COVID-19 pandemic may be fading from view, it seems to have permanently changed the way many people in the U.S. work. According to Gallup polling, average work from home days increased from 2.4 per week pre-pandemic to a stable 3.8 as of last September.
In turn, once bustling offices have emptied out. A new report released this month by Moody’s Analytics revealed the national office vacancy rate has risen to nearly 20%.
That’s a record-breaking level, said the firm. At 19.6%, this new record shatters a 19.3% rate recorded in 1986 and 1991 during the Savings and Loan Crisis.
Here are the metro markets with more than 1 million square feet in vacated space:
· San Francisco, Calif. – 4.4 million square feet in negative absorption
· Los Angeles, Calif. – 2.4 million square feet in negative absorption
· Philadelphia, Pa. – 2 million square feet in negative absorption
· Washington D.C. – 1.4 million square feet in negative absorption
· Seattle, Wash. – 1.3 million square feet in negative absorption
· Denver, Colo. – 1.2 million square feet in negative absorption
· Orange County, Calif. – 1.2 million square feet in negative absorption
· Baltimore, Md. – 1.1 million square feet in negative absorption
· Raleigh-Durham – 1 million square feet in negative absorption
These aren’t the only metro areas seeing a rise in office space vacancy. Moody’s data indicates that more than half of the primary metros in the U.S. (50 out of 79) have experienced negative absorption. San Francisco also lead the loss with 2.4 million square feet of net move outs, while D.C. and Chicago have also seen more than 100,000 square feet of net move outs.
Moody’s also said that office space vacancies have contributed to commercial real estate value declines. Along with existing office space left vacant, new construction fell “well below” the firm’s estimates to hit a low not seen since 2012.
“Suburban offices also fared better due to their proximity to local communities and, in some cases, shorter commute times,” said Moody’s.
Experts told NPR last year that the office space exodus could be a dangerous development for the economy, but Axios offered a different view this month.
“The transition marks an enormous societal shift as Americans adjust to a whole new way of working and living – big changes are underfoot in cities and suburbs around the country,” said the outlet. “Yet it’s happening so slowly and in such a predictable fashion, that the impact on the overall economy so far has been minimal.”