The office leasing market has slumped to a new low.
The vacancy rate of offices across the country rose to 19.8 percent in the first quarter, according to Bloomberg. The data comes courtesy of a preliminary report by Moody’s Analytics, which has been tracking the sector for 45 years.
Last quarter’s vacancy rate represents a tick upward from the then-record 19.6 percent reported fourth quarter. Nevertheless, it’s the highest vacancy rate recorded on the national level since Moody’s began tracking office leasing.
The problems dogging office landlords are familiar four years after the onset of the pandemic. Companies are changing expectations around work habits as more people are allowed to abandon some or all of their office space to work remotely or in a hybrid environment. Tenants, therefore, no longer need to spend as much on leases.
“The office stress isn’t quite done yet,” Thomas LaSalvia, Moody’s head of commercial real estate economics, told the outlet.
Despite more cold sweats in the offing for landlords, LaSalvia told Bloomberg that the worst for the market may have been dodged as recent economic indicators remain positive.
That’s probably little comfort for building owners, even as a stabilization in interest rates promises the potential for brighter days.
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Pockets of the country are still struggling with office vacancies. In San Francisco, the vacancy rate hit a record 36.6 percent in the first quarter, according to CBRE. The Bay Area is struggling with tenant departures as the tech industry remains on the forefront of the shift towards remote work.
The tech exodus from the office sector could soon worsen as one of the country’s more prominent tenants appears poised to cut space. Amazon is looking to cut down on its own office vacancies by passing on lease renewals, terminating some early and reducing its use of empty floors; the company expects to save roughly $1.3 billion.