Some States See Alarming Rise in Office Vacancy Rates

Vacant Office Space In San Francisco Reaches All Time High — (Photo : Photo by Justin Sullivan/Getty Images) An office sits vacant on October 27, 2022 in San Francisco, California. According to a report by commercial real estate firm CBRE, the city of San Francisco has a record 27.1 million square feet of office space available as the city struggles to rebound from the Covid-19 pandemic. The US Census Bureau reports an estimated 35% of employees in San Francisco and San Jose continue to work from home.

Some states in the U.S. are now seeing an alarming increase in office vacancy rates, partly due to the ongoing shift towards hybrid and remote working.

In San Francisco, the office vacancy rate hit 36.6%, a slight increase from the 35.6% vacancy rate recorded in the fourth quarter of 2023, according to SFGate, citing preliminary data from commercial real estate firm CBRE.

In New York, office vacancy rates have increased to an alarming 20%, forcing landlords to introduce amenities exclusively for tenants' use, per the New York Post.

In comparison, the national office vacancy rate is 17.9% as of the first two months of 2024, according to Commercial Edge. This marked an increase of 140 basis points year-over-year. However, it is lower than the 19.6% rate recorded in the last quarter of 2023, Moody's Analytics reported in its Q4 2023 Preliminary Trend announcement. It was the highest reported since 1979.

Hopeful Future Ahead for Office Markets

Despite the recent uptick, CRBE Tech Insights executive director Colin Yasukochi believes the office market, specifically that in San Francisco, could see its situation turn around.

"The San Francisco office market is beginning to transition out of its four-year downturn. While it will take many years to rebalance supply and demand, we are starting to see positive signs," Yasukochi told SFGate.

Yasukochi noted that potential tenants in San Francisco are now looking for about 6 million square feet of office space, up from 4.2 million in the last quarter of 2023. Additionally, he said the firm expects San Francisco to see more subleases, renewals, or new leases this year and see the highest level since 2019, before the COVID-19 pandemic.

In New York, landlords who introduced unique amenities in their buildings have seen success in securing tenants. In 101 Park Ave., for example, 97% of all office space is leased to an array of financial tenants. The building features 15 golf simulators exclusively for tenants.

Another building, 1 World Trade Center, is more than 95% leased. The building features a wellness and athletic center on the 64th floor.