Key Highlights
- According to National Association of REALTORS®’s (NAR) October Commercial Market Insights report, Q2 saw biggest occupancy losses EVER in office properties
- West and South regions of country saw largest occupancy losses
- At pace of 100,000 monthly jobs created, employment in office-using jobs predicted to recover by Q2 2022
The COVID-19 pandemic wiped out occupancies in office properties in Q2 2020. Flat-out job losses, business closures and some 40% to 50% of office workers still working from home (with many employers now delaying return-to-office dates to the summer of 2021 at the earliest) took HUGE tolls in office occupancies, according to the National Association of REALTORS® (NAR) latest October Commercial Market Insights report. Office space occupancy fell by 22.8M square feet in Q2 2020, or 0.4% of the 5.2B square fee in office space, according to Cushman and Wakefield office data.
The West and South regions of the country suffered the largest office occupancy losses with San Francisco in the lead followed by New York, Phoenix, Los Angeles and Dallas. Even at a pace of 100,000 monthly jobs added, NAR predicts that employment in office-using jobs will recover by Q2 2020, faster than the 4-year recovery period during the Great Recession when jobs rose by 50,000 per month.
Large and tech-oriented metros suffered the largest occupancy losses in Q2 2020. Just in San Francisco, New York, Phoenix, Dallas and loss Angeles, more than 1M square feet of office space became unoccupied in Q2 2020. BUT, occupancy losses are different than vacancy rates. Even in San Francisco, where occupancy losses were the largest, the City still has a relatively low comparative office vacancy rate of 9.9%. Take a look:
- Houston – 21% vacancy rate
- Brooklyn – 20.3% vacancy rate
- Los Angeles – 19.6% vacancy rate
- Atlanta – 18.4% vacancy rate
- Chicago – 18.4% vacancy rate
- New York – 11.7% vacancy rate
- Charlotte – 10.9% vacancy rate
- San Francisco – 9.9% vacancy rate
- Seattle – 9.8% vacancy rate
- Raleigh/Durham – 8.6% vacancy rate
- Charleston – 8.2% vacancy rate
(Other major metros have mid-market vacancy rates ranging from 18.1% in Dallas to 12.1% in Austin.)
Major metros suffering the most from declining demand for subleased spaces are metros associated with tech workers such as Rochester, San Francisco, New York, Austin, Salt Lake City, Phoenix, Charlotte, Seattle, Nashville, Inland Empire and Portland. Office-using industries such as computer and mathematical workers who are continuing to work at home have diminished by as much as 65%, according to the BLS Covid-19 Supplement Survey Table 2.
NAR and Ken McCarthy with Cushman and Wakefield believe that overall demand for office space is contingent upon an effective, save vaccine for COVID-19. Without such a vaccine, business openings and closings, working from home and office density requirements will remain best guesses.
Thanks to the National Association of REALTORS® and Cushman and Wakefield.
Also read: Extreme Drought of For-Sale Existing Homes, V-Shaped Recovery in July’s Housing Market, eXp World Holdings Stock Price Rises with Its Earnings
