Office space is poised to shrink
In just the first half of 2023 alone, 14.7 million square feet of national office inventory was removed, while 12.7 million square feet was converted into other property types, reports JLL.
And in the second quarter of the year, just 1.4 million square feet of new office construction broke ground.
The rise in remote work policies — particularly during COVID-19 lockdowns — has reduced the need for available office space, while surging borrowing costs are hurting landlords, some of whom have filed for bankruptcy or gone into default.
Rowden also told Bloomberg that although vacancy rates during the Great Depression likely surpassed the current 20% average in the U.S., there was still plenty of new construction — like the Merchandise Mart opening in Chicago in 1930 and the Empire State Building in Manhattan in 1931.
“The last 12 to 24 months have compounded some of the existing trends to push us to the point where negative inventory, at least for a temporary period over the medium term, is becoming highly likely,” Rowden said.
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Learn MoreSome office spaces are being converted into apartments
There’s been an unexpected upshot to the decline in office space — some buildings are being repurposed for residential use, a welcome reprieve for Americans struggling with the ongoing housing crunch.
A July report from apartment listing service RentCafe uncovered that 45,000 apartments are currently being converted from former office spaces.
The city of Denver is currently assessing the feasibility of transforming as many as 30 office buildings into residential units, while Pittsburgh is hoping to create affordable homes from underutilized office spaces as well.
Another report from the Brookings Institution points to the importance of mixed-use areas in order to revitalize downtown cores. The think tank suggests revamping some surplus office spaces into coworking facilities, restaurants, college campus expansions and more.
However, it also notes that office conversions can be “economically challenging and often not possible without significant public funding.”
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