Office Vacancy Data Now Worse Than During Great Recession
The spread between vacancy and availability has “rarely been this wide.”
Office occupancy continues its slog and now is measured as worse than the Great Recession, according to a new report from CoStar.
Both vacancy (at 12.9%) and availability (at 16.4%) are at record highs. Vacancy has increased by 333 basis points since the end of 2019. Availability has increased 410 basis points over the same period.
“The spread between the two metrics has rarely been as wide and suggests room for vacancy to increase further,” the report said.
Availability also includes space that is currently occupied but no longer needed (i.e. the existing tenant has given notice of non-renewal and/or has listed the space on the sublease market).
New leasing volume increased about 5% quarter-over-quarter but was still 16% below its pre-pandemic average.
Preliminary figures also “indicate that the average size of new leases is shrinking again, as it did in the first 18 months of the pandemic era,” according to the report. “This could indicate smaller overall space needs as tenants continue adapting to both new ways of working and economic headwinds that have slowed hiring and could lead to layoffs.”
Furthermore, occupied space per office-using worker is at a record low and now stands 12% below 2015’s reading.
“Today’s hybrid work arrangements mean that the same office can support more workers,” CoStar wrote. “We used to call this ‘density,’ but that term feels out of date now since fewer workers are using the space at any given time, making it feel less dense.”
Throughout the 2010s, the ratio of space per worker decreased as offices “densified”—and particularly as companies put more people into open-plan offices, according to CoStar.
It found that had the long-term trend prevailed from the end of 2019 until now, square footage per worker would currently be 7.5% below where it was in 2015; thus, the pandemic has accelerated the trend by about 5 years.
Translation: Organizations are occupying approximately 337 million fewer square feet than we would otherwise expect.