Forefront | Blog
Office Real Estate Faces Unprecedented Vacancy
Pounded by remote work and declining tenant demand for space, the US office sector experienced an office vacancy rate of 18.4% in the third quarter of this year.
Although return-to-office mandates are increasingly common, companies are rapidly downsizing their offices. Organizations held more space in the past for contingency reasons. Now, they are realizing they can actually reduce some of the space through hybrid work and the way their employees are actually utilizing the space.
A recent survey shows that 88% of companies now mandate that employees work a certain number of days in the office. Yet, most of those companies plan to reduce office square footage next year. More companies are making fuller use of their existing offices, with 56% of respondents saying the majority of their employees work in the office full time and 40% saying the majority of their teams work hybrid. Only 4% said their company was fully remote.
In addition to the impact from remote work, landlords have also been pressured by rising borrowing costs, which have contributed to a nearly 21% decline in office prices over the last 12 months. All of these factors create a highly uncertain future for the office real estate market as we move into 2024.
