Billions in Potential Revenue Vanish as Office Spaces Sit Empty

Buildings aren’t perfectly performing. There’s usually some amount of vacancy that represents opportunity loss — income that can’t be captured. It’s a cost of doing business.

The costs for offices in particular have skyrocketed since the pandemic brought work-from-home into the corporate world. GlobeSt.com analyzed data from Cushman & Wakefield’s US Marketbeat Office Q3 2024 report, looking at nearly 100 metro regions as well as regional and national views of performance generated by vacancies, asking rents, and square footage.

At the national level in the third quarter, there were about 5.5 billion square feet of office space with an approximately 20.9% vacancy rate and an average $38.15 per square foot asking rent. The total represents about $43.5 billion annualized opportunity loss.

Of regional areas, the West had the largest value of vacancies, with about 1.5 billion square feet of space, accounting for a 21.1% rate, and an average price of $41.61 per square foot. That translates into an annualized $13.3 billion.

The next largest loss was in the Northeast — roughly $13.0 billion coming out of 1.3 billion square feet of inventory, a 21.0% vacancy rate, and an asking rate of $47.93 per square foot.

The Northeast just edged out the South, with its $12.5 billion annualized loss on almost 1.9 billion square feet in office space, a 20.3% vacancy rate, and asking rents of $33.32.

Last is the Midwest. The amount of office space was much lower with roughly 793.1 million square feet and a $27.38 per square foot annual rent, though the highest vacancy rate at 21.9%. The total was an annualized loss of $4.8 billion.

Sorted by annualized loss size, here are the largest losses: New York City, $7.63 billion; Chicago, $2.14 billion; San Francisco, $2.04 billion; San Jose, $2.03 billion; Dallas, $1.85 billion; Los Angeles, $1.84 billion; Boston, $1.60 billion; Houston, $1.49 billion; Washington, D.C., $1.35 billion; Atlanta, $1.27 billion; and Northern New Jersey, $1.14 billion.

Break New York City into parts and Midtown, Midtown South, and Downtown each would separately be in the billion-dollar-plus club, respectively at $4.61 billion, $1.48 billion, and $1.16 billion. That omits only Brooklyn, which comes in at $394.80 million.

Flip the list and only four metros/regions are under $24 million in annualized loss. They are Binghamton, NY, $3.04 million; Savannah, GA, $5.57 million; Roanoke, VA, $11.82 million; and Fredericksburg, VA, $15.61 million. And then there are only three additional under $30 million: Fort Myers/Naples, FL, $24.69 million; Reno, NV, $25.29 million; and San Juan, PR, $26.80 million.

The Cushman & Wakefield report made some overall points. Growth remains on “solid footing,” with GDP growth likely to continue. Office occupancy increased in a quarter of markets and half of all markets in the U.S. had improved absorption compared to the third quarter of 2023.

Occupiers have largely stopped adding new sublease space on the market. Also, quality wins in markets, with high-quality buildings in gateway markets seeing nearly 800 basis points higher occupancy rates than the office average. Reduced new construction likely means the higher-quality buildings will continue to outperform.