First-Ever Net Decline Observed In U.S. Office Space Inventory
Office space has reportedly decreased for the first time in history, placing the U.S. office industry in unknown territory.
As per data provided by the commercial real estate brokerage Jones Lang LaSalle (JLL), less than 5 million square feet of new offices have been built in the United States so far this year, while 14.7 million square feet have been taken off the market, Bloomberg reported on Thursday, July 27. This would be the data’s first net fall since at least 2000, if not ever.
“We would have a lot of confidence in saying that national office inventory has never actually declined in the past,” Jacob Rowden, JLL Research Manager, U.S. Office, stated in the study.
According to the paper, the reduction is due to an increased number of people working remotely, a trend maintained by pandemic lockdowns.
According to the research, office block owners deal with decreased demand and growing financing rates. As a result, delinquencies have increased, and property values have dropped.
According to the study, the overabundance of workplaces has allowed developers to convert the space into homes. According to a RentCafe article, the former office space is being turned into around 45,000 flats.
“The last 12 to 24 months have compounded some of the existing trends to push us to the point where negative inventory, at least for a temporary period over the medium term, is becoming highly likely,” Rowden said in the report.
According to reports from February, the American mall business may be on the verge of collapse, which could herald a wave of defaults in office space commercial real estate. According to Bloomberg News, on February 17, the already shaken industry is also dealing with increasingly aggressive lenders, rising mortgage rates, and declining home values.
According to Ori Franco, chief financial officer of Density, real estate is typically the second-largest expense for companies who rent office space, behind only salaries.
Companies can make better decisions about whether to renew a lease and whether to combine space if they have access to almost real-time data on how that space is being used, Franco said at the time.
