Remote or hybrid work models will likely continue to grow, leaving commercial landlords with empty office spaces in prime city real estate.
- Fewer employees are coming into the office, meaning businesses need smaller office footprints, if they even need a physical office at all.
- With remote work expected to grow, 330 million square feet of office space may be empty by 2030, a report from real estate firm Cushman & Wakefield found. Another 740 million square feet will likely become vacant from what the firm calls “natural causes,” resulting in around 1 billion square feet of unused office space in the next seven years, Fortune reports.
- Pre-pandemic office vacancy rates were around 12%. Rates are expected to reach 18% by 2030.
- Consequences of empty office spaces could have a ripple effect as landlords lose revenue and city governments receive fewer taxes from commercial properties.
Why it’s news
As employees and employers continue to battle over remote work, hybrid systems are becoming more popular. This is moderately good news for building landlords as it means companies will still need to rent spaces, though not nearly as large as before. Employers are also losing out as some have already invested in large office spaces they no longer need.
Google, Amazon, and Meta Platforms were among some of the major companies to buy up empty office buildings during the pandemic. They were operating under the assumption that in-person work would return and their growing workforces would need more space. Now, these companies are announcing layoffs, and employees are fighting to stay remote.
As companies withdraw from urban spaces, Cushman & Wakefield’s report suggests this could signal a broader retreat from cities. As employees move to more suburban and rural areas, businesses must move to where their customers are.
Some of the effects started to become evident during the pandemic. Some office buildings are already being converted into living spaces in New York City and Los Angeles. While this provides revenue for the landlords and more potential living spaces for tenants, cities have expressed concerns about the loss of tax revenue from commercial spaces, Fortune reports.