It is no secret the United States is experiencing one of the worst commercial real estate downturns in our history. Different than the office slump in the early 1990’s, office vacancy is a problem for all buildings.
According to a recent article in Urbanland, 40% of office vacancies during the early 1990’s were concentrated in buildings less than six years old. The rise in vacancy was caused by overbuilding and as a result was prevalent in younger properties. The problem today is different. Currently, 40% of office vacancies are spread among buildings that have been built sometime in the last twenty-two years and the rise in vacancy is due to layoffs and job cuts. Vacancy has increased in properties no matter the age, class or location.
My biggest concern for office landlords is high vacancy rates are here to stay. Technology is making it easier for people to work from home, the coffee shop or even the gym. Companies are realizing there are huge cost savings in reducing their real estate footprint. Landlords will have to be creative and offer substantial incentives to lure new tenants. I would be interested to hear your thoughts. How do you think technology is affecting the use of office space? Is there an office landlord that has taken an innovative approach to lure new tenants? Send in your comments…….
