There is a lot of office space that is vacant, creating an eerie sense of abandonment in many cities. About half of the world’s major companies expect to require less real estate in the coming three years. American cities, particularly San Francisco, may face a surge in vacant offices.
In a survey conducted by UK-based real estate firm Knight Frank, half of the companies with over 50,000 employees plan to reduce their office space. Most predict a decrease of 10% to 20%. This trend signifies a shift in traditional workspace usage and could shape urban landscapes worldwide.
Right now, the US has around 1 billion square feet of empty office space. This picture comes from the global shift to remote work as a result of lockdowns. By the end of Q1 2023, we had 963 million square feet of empty office space. This space equals over 48,000 vacant floors in an office tower.
New York has the most empty space: 76 million square feet. If stacked up, it would reach seven miles high. Next is Washington, D.C., with a vacancy rate of 21%. That’s 8% higher than a healthy rate. But San Francisco beats all with a vacancy rate above 26%.
These numbers show the impact of moving to remote work. More empty offices and higher interest rates are hurting US office markets. Experts predict a 30% drop in property values in 2023. This drop could mean big losses for banks.
Small and regional banks are in a tough spot. They make most of the office loans in the US. But, unlike big banks, they don’t have big reserves. These banks could face downgrades and more credit losses. Higher interest rates add to their problems by damaging their balance sheets and reducing their ability to lend.
Companies face a tricky balance. They pay for office space, but they also need to respect the shift to remote work. The stakes are high. The decisions made affect companies, workers, our environment and the wider economy. How we adapt will shape our future: will we stick with old structures, or finally decide what work means in this century? And then, create the structure to support it.
The question is: can we lead with purpose and use structure as our foundation? The answer is still uncertain. And until we make the shift, not much will change.
So, we have a problem with office space. But where is the conversation about our greatest opportunity in designing meaningful, vibrant work environments where dialogue, relationships and business flow?