For all of the negative benchmarks office landlords have experienced in the three years since the start of the pandemic, there’s one they’ve avoided until now: a net loss of space.
The country is on track to end the year with less office space than it started with, according to analysis by Jones Lang LaSalle reported by Bloomberg.
Less than 5 million square feet of new office space has broken ground this year, according to JLL. Meanwhile, the volume of space that has either been destroyed or converted towards other uses this year is 14.7 million square feet.
JLL has no net declines of office space on record, dating back to the start of the century. Even though the numbers don’t go further back, the firm is confident that there’s never been a net loss of office space in the country before.
“We have done some high-level estimates in the past and think that the closest we came to negative inventory historically would have been during the 1930s at the height of the Great Depression,” JLL research manager Jacob Rowden told Bloomberg.
In the years leading up to the pandemic, the volume of office space in the country seemed to be on a never-ending rise. Space continually went up from 2016 to 2019, capped by an addition of 68 million square feet the year before the pandemic.
Even during the first years of the pandemic, space was still coming on to the market. In 2020 and 2021, a combined 69 million square feet was added. Last year, that number dropped dramatically to 4 million square feet, a decline heading well into the negative net volume this year.
Read more
Commercial
New York
Brookfield defaults on more office buildings
Commercial
National
CMBS delinquency jumps as office loans go bad
Office landlords have struggled to bring tenants back to the office on a permanent basis and companies have been scaling back their office needs left and right. Vacancies across the country have spiked and some office owners are dealing with defaults and delinquencies.
Part of the office loss can be attributed to conversions, particularly to residential properties, although that has not proven to be an easy shift to make. Across the country, 45,000 apartment units are in the pipeline at office conversions.
— Holden Walter-Warner