US Office Space Sees First-Ever Decline as Buildings get Repurposed Into Apartments
In an unprecedented event, the total amount of office space in the US is set to decline for the first time in history, a phenomenon likely to be unparalleled even during the Great Depression.
According to Bloomberg which cited data from global real estate services company Jones Lang LaSalle Inc., the decline is due to a scarcity of new construction and an abundance of deteriorating office spaces being either converted for other purposes or entirely demolished. To illustrate the point, about 5 million square feet of new office space was earmarked for construction in 2023 so far, compared to 14.7 million square feet that has been torn down.
Historically, offices have been central to global commerce and trading, growing skyward with technological advances like the elevator and steel-beam construction. However, recent technological shifts, such as the ability to work remotely, have eroded the need for large offices. This trend was accentuated by the early pandemic lockdowns and continues to be felt as employees remain reluctant to return to physical offices.
“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,” explained the real estate company’s US research manager Jacob Rowden in an emailed statement. “We have done some high-level estimates in the past and think that the closest we came to negative inventory historically would have been during the 1930s at the height of the Great Depression.”
Landlords are faced with declining demand, and soaring borrowing costs have squeezed many, resulting in delinquencies and falling prices. Major Wall Street landlords, including Blackstone Inc. and Brookfield Asset Management Ltd., have stopped payments on properties considered unprofitable.
Yet, the decline in office space is not merely a sign of economic loss— it’s also perhaps an opportunity. According to a recent report from RentCafe, approximately 45,000 apartments are being converted from former office spaces, alleviating some of the US housing shortage.
Information for this story was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
