Occupancy fell by 2 million square feet as of November, compared to the third quarter in 2021.
Even before the emergence of the Omicron variant, it was clear that the office recovery had started to falter in the face of the ongoing recovery.
Occupancy fell by 2 million square feet as of November, compared to the third quarter in 2021, bringing the total loss in office occupancy to 133 million square feet, according to the National Association of Realtors. This was despite an increase in occupancy of six million square feet during the third quarter and a decline in work-at-homes from 35% of American laborers during the pandemic to 12% in October.
“The factors of the ongoing pandemic, more people working from home (fully remote or hybrid) compared to the pre-pandemic level, the decline in office space per worker, and the tight job market all pose headwinds to absorbing this enormous amount of office space,” wrote NAR Research Economist Scholastica Cororaton.
The economist predicted the pandemic-spurred factors are likely to help keep vacancy rates hovering at over 10% until the end of 2022.
For instance, even with the rise in people returning to offices and other job sites, Cororaton cautioned the number of office-using workers who work from home is still 3.6 times the number of workers who worked from home prior to the pandemic.
At the same time, office workers teleworking use nearly four times less pre-pandemic levels of office space, she noted.
The decline in average square foot per office worker started before the pandemic with a decrease to 243 feet at the start of Covid-19 from 273 in 2011 from the use of flexible spaces and hot-desking, according to the report.
The study added there is a strong demand for office-using jobs but only half of the job postings can be filled as workers can’t move geographically to where the jobs are for reasons such as the high cost of housing or due to personal reasons.
As of November, the metro areas that have suffered the largest loss in office occupancy are the centers for the headquarters of major tech, financial, and business corporations New York (-31 million square feet, or MSF), Los Angeles (-11.5 MSF), San Francisco (-11 MSF), Washington, DC (-9.8 MSF), and Chicago (-9.5 MSF)..
Secondary or tertiary metro areas have been less impacted with the regions that have seen an increase in office space occupancy led by Durham (+1.4 MSF), Boise (+1.4 MSF), San Antonio (+1.4 MSF), and Palm Beach (-1.3 MSF).
Source: “The Pandemic Takes Another Shot at the Office Asset Class“
