Office landlords in Los Angeles, San Francisco and San Jose stand to lose at least $2 billion a year in revenue lost to vacant workplaces.
The three California cities were among the top five U.S. metros with the highest cost of office vacancies, the San Francisco Business Times reported, citing figures from Switched on Business and Cushman & Wakefield.
L.A. ranked second with 51 million square feet of vacant offices this summer, worth $2.1 billion in lost yearly revenue.
San Francisco, with a 37.3 percent office vacancy, ranked fourth at 29 million square feet and $2.01 billion in lost revenue, while San Jose ranked fifth at 37.7 million square feet and $2 billion in lost income.
Throughout the Bay Area, 94.9 million square feet of offices were vacant by mid-year, with an expected lost rent value of $5.35 billion.
Oakland and the East Bay ranked 16th, with 17.7 million square feet empty for a loss of $715.3 million. San Mateo County ranked 19th with 7.5 million square feet and a loss of $527.2 million. The North Bay ranked 53rd with 2.9 million square feet and a loss of $96.4 million.
That’s according to a new report by Switched on Business, which compared second-quarter occupancy data against market rates provided by Cushman & Wakefield.
“To me, this evolution in office is more about metros and neighborhoods — where buildings, regardless of class, are either going to do quite well over the next few years or they’re going to become obsolete,” Thomas LaSalvia, head of commercial real estate at Moody’s Analytics, told the Business Times.
“It really turns out that the old saying ‘location, location, location’ is still incredibly valuable, and maybe more than ever in this asset class.”
Across the nation, commercial real estate insiders predict a quarter of U.S. office space could be vacant by early 2026. There are 11 metro areas with at least $1 billion worth of empty offices.
A partial shift to remote work has put New York at the head of the pack with 105.8 million square feet of vacant offices for an estimated rent loss of $7.61 billion per year.
Chicago ranked third at 58.1 million square feet and a loss of $2.05 billion.
While space may be more expensive on the coasts, when looking at sheer volume of unused offices, Texas is among the top markets. Dallas-Fort Worth had 52.8 million square feet of vacant offices worth $1.62 billion, while Houston had an empty 50 million square feet valued at $1.56 billion.
— Dana Bartholomew