More US offices will become vacant by the end of the decade due to hybrid and remote work

Since the start of the COVID-19 pandemic, the number of people working from home has skyrocketed. Once a safety measure, remote work has become increasingly popular among office employees. Three years later, most US employees prefer to work from home, at least part-time. The rise in remote work has left many commercial buildings empty, and it seems the number of vacant office spaces will continue to increase. 

By the end of the decade, as many as 330 million square feet of US office space could become vacant due to hybrid and remote work, according to a new report from Cushman & Wakefield. In addition, the global commercial real estate firm also estimated that the total size of unused office space would reach 1.1 billion square feet, 740 million square feet of which will qualify as natural vacancy. 

“The relationship between job growth and office demand has fractured,” the report reads. “While elements of this relationship are likely to resolidify as the impact of remote working strategies on office demand stabilizes, the office sector is nevertheless facing a period of structural change that will pressure operating fundamentals and property income.”

Over the past two years, US employers have been trying to lure workers back to office spaces. However, most still prefer to follow a hybrid schedule. In the last week of January, office occupancy in the country’s top 10 metro areas reached 50.4 percent, the most since the start of the pandemic, The Washington Post reports. However, the county’s office occupancy is unlikely to rise past this point. 

In late 2022 and early 2023, tech giants announced major layoffs that impacted over 260,000 people. The mass layoffs were also followed by the decision to leave some office spaces. The social media giant, Meta, announced that it would not renew two leases at 30 and 55 Hudson Yards, Business Insider reports. These two leases measured more than 250,000 square feet across the two buildings. 

The national office vacancy rate sat at around 12 percent in 2019, the last pre-pandemic year. By 2030, this rate will increase by 55 percent and reach 18 percent, according to Cushman & Wakefield. The report suggests two possible reimagination strategies: improving office spaces or turning them into multi-family or mixed-use projects. 

“Just as retail didn’t die in the years following the e-commerce boom, the office sector is not in danger of demise,” the report says. “Recognizing the challenges and opportunities head-on and with a proactive, creative and strategic approach will help both existing ownership and the prospective investment community ensure the viability of millions of square feet of commercial real estate space.”

Resources:

“OBSOLESCENCE EQUALS OPPORTUNITY,” by Abby Corbett, Kevin Thorpe, and David Smith (Cushman & Wakefield, 2023)

“Office vacancy will increase by 55% by the end of the decade as hybrid and remote work push real estate to an ‘inflection point’,” by Tristan Bove (Fortune, 2023)

“1.4B SF Of U.S. Office Will Be Obsolete By 2030, Cushman & Wakefield Predicts,” by Ciara Long (Bisnow, 2023)

“America’s offices are now half-full. They may not get much fuller.” by Taylor Telford (The Washington Post, 2023)