What’s going on:
As the demand for office space dropped due to the switch to remote working, New York City office vacancy rates surged to an all-time high of 16.1% in the first quarter of 2023 — leading the way in a nationwide trend that saw vacancy rates sitting at 16.4%.
As a result, New York has been attempting to repurpose office spaces into residential buildings. The pandemic further highlighted the city’s plight, as more than 22 million square feet of office space became available for subletting, breaking the previous record of 21.16 million square feet set in July 2021, according to Investopedia.
Why it matters:
In February, Google declared they would be spending $500 million in the first quarter of the year to reduce their office space, mostly in the Bay Area. Though New York City has seen similar trends, San Jose and San Francisco have some of the lowest office usage due to tech companies’ ability to work from home and the cutting of jobs.
How it’ll impact the future:
Across the U.S., office vacancy rates spiked to an average of 16.9% at the end of the first quarter, rising from 12.4% the previous year.
This isn’t good news for the commercial real estate sector, and companies will continue to scramble to find ways to cut back costs — either by selling off their office spaces, reducing their spaces, or forcing workers to come back into the office.