The Geography of Empty Offices: Mapping America’s Urban Vacancy Crisis

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The American urban landscape is undergoing a significant transformation. Office buildings, once bustling hubs of activity, now stand eerily quiet in cities across the nation. This shift isn’t just a passing trend – it’s a geographic phenomenon that’s reshaping our urban centers and challenging our understanding of work and space.

A new report by Switch On Business has shed light on this issue, providing us with fascinating data to analyze. Let’s dive into their findings and explore the maps that tell this compelling story.

Quick Facts:

• New York City leads with $7.61 billion in annual lost rent from vacant offices.
• Los Angeles follows with $2.10 billion in annual lost rent.
• New York City has the most vacant office space: 105.8 million sq. ft.
• Chicago comes in second with 58.1 million sq. ft. of empty offices.

New York’s Skyline Shift: A $7.61 Billion Office Vacancy Crisis

The first map reveals a striking transformation of the American urban landscape, with New York City at its epicenter. The Big Apple’s office market is facing an unprecedented challenge, with vacant offices accounting for a staggering $7.61 billion in lost revenue annually. To put this into perspective, that’s more than the GDP of some small countries.

This isn’t the first time the U.S. has grappled with office vacancies. The late 1970s and 1980s saw similar peaks, driven by overbuilding during periods of economic optimism. However, the current situation is unique in its scale and underlying causes.

While past vacancy spikes were typically linked to economic downturns or specific events like the 2001 terrorist attacks and the 2008 financial crisis, today’s empty offices reflect a more fundamental shift in how we work. The rise of remote work, accelerated by the COVID-19 pandemic, has revolutionized our relationship with physical office spaces.

Dr. Stijn Van Nieuwerburgh, a Columbia Business School Professor of Real Estate, has coined the term “urban doom loop” to describe this phenomenon. He suggests that the future of cities like New York hinges on how we adapt to this new reality. “What happens to New York City from here on out depends on the actions we take and the policy decisions that are made,” says Van Nieuwerburgh. “In a best-case scenario, we remove 30 or 40 percent of the office stock in New York City and turn it into wonderful housing. New York City has all these great amenities, it’s a wonderful place where young people want to live, regardless of where they work.”

This transformation isn’t limited to New York. California’s tech hubs are also feeling the impact, with Los Angeles ($2.10 bn), San Francisco ($2.01 bn), and San Jose ($2.00 bn) all facing significant losses. Yet, even combined, these three cities’ vacant office values fall short of New York’s colossal figure.

The second map, based on the Switch On Business report, reveals the extent of vacant office space across major U.S. cities. New York City again tops the list with 105.8 million sq. ft. of empty offices – an area that could fit 2.9 Central Parks! Chicago follows with 58.1 million sq. ft., showcasing how this issue spans from coast to coast.

Los Angeles Leads the West in Office Vacancies

In the Western United States, California cities are feeling the brunt of the office vacancy crisis. Los Angeles tops the list with $2.10 billion in lost rentals across 51.1 million square feet of empty space. San Francisco and San Jose follow closely, each with about $2 billion in lost value. This concentration in tech-heavy areas suggests that the tech industry’s embrace of remote work is a significant driver of this trend.

A recent study from Rand Corp. indicates that around 2,300 commercial properties in Los Angeles could potentially be converted to provide between 72,000 and 113,000 homes. State Assembly Member Matt Haney notes, “Our downtowns still are built for a time and a way of work that’s not coming back anytime soon,” highlighting the need for adaptive reuse strategies.

Chicago Dominates Midwest’s Office Vacancy Landscape

In the Midwest, Chicago stands out with a staggering 58.1 million sq. ft. of vacant space, worth $2.05 billion annually. This amount surpasses the combined total of the next six Midwestern cities. The skyscraper’s birthplace is now witnessing some building prices plummet to less than a quarter of their previous valuations.

Minneapolis—Saint Paul follows with $621.77 million in lost value. In St. Paul, subletting has become common as companies reduce costs while adapting to the slow return to the workplace. The city is also exploring office-to-residential conversions, which could boost both housing and employment levels. Local developer Chris Sherman points out, “Seventy-five percent of the cost of conversion goes to labor and only 25 percent material, whereas on new construction, it’s about the opposite. So for both sustainability and job creation, conversions are highly impactful.”

Dallas and Houston: $3 Billion Down in Vacant Offices

In the Southwest, the Texas cities of Dallas and Houston are facing significant challenges, with $1.62 billion and $1.56 billion in lost value from vacant office space, respectively. This region was a hotspot for over-building during the oil boom of the 1970s, and twentieth-century buildings have fallen vacant at a much higher rate than those built in recent years.

Some employers, like NRG Energy, are attempting to lure workers back with state-of-the-art surroundings and amenities such as on-site gyms. However, the overall trend suggests a need for reimagining these spaces for the post-pandemic era.

Atlanta: Southeast’s Epicenter of Office Vacancies

In the Southeast, Atlanta, Georgia stands out with $1.24 billion in lost value from empty offices, significantly more than other cities in the region. According to data from CBRE, a real estate services firm, almost one-third (32.4%) of all office space in Atlanta is empty. This marks the 9th consecutive quarter that availability has risen in the city.

The research indicates that the increasing vacancy of offices in Atlanta is primarily attributed to major corporations closing down satellite offices in order to save costs. “Overall, the stubbornly high availability rate in Atlanta continues to be the result of corporate tenants with substantial footprints offloading unneeded space amidst economic distress,” the CBRE report states.

Boston and New Jersey Join New York in Office Space Losses

While New York City leads the Northeast (and the entire United States) with $7.61 billion in lost rent, Boston ($1.43 billion) and New Jersey ($1.37 billion) are also seeing significant impacts. The Boston Policy Institute calculates that the city may lose $1.4 billion in taxes over five years, with Boston being “uniquely dependent on this revenue source and therefore uniquely vulnerable to the price declines in the commercial sector,” according to Evan Horowitz of Tuft’s Center for State Policy Analysis.

In response, Boston Mayor Michelle Wu has implemented a 75% discount on residential tax bills for converted buildings to stimulate redevelopment projects. Economists see Boston as one of several U.S. cities where office-to-residential conversion is most achievable, because of the high price of home rentals.

Why is this happening?

Several factors contribute to this nationwide phenomenon, as highlighted by the Switch On Business report:

• Remote work revolution: Around 28.6 million, or 20% of U.S. workers aged 18-24, now work on a hybrid or fully remote basis. This shift has dramatically impacted office occupancy rates, which are now only half of what they were pre-pandemic.
• Technological advancements: Improved communication tools have made remote work more feasible and efficient.
• Changing worker preferences: Many employees now prioritize flexibility and work-life balance over traditional office setups.
• Economic pressures: Companies are looking to cut costs by reducing their physical footprint.
• Overbuilding: Decades of excessive office construction have led to a surplus of space.

This significant change in work patterns, especially among younger workers, is reshaping not just individual companies but entire urban landscapes. The halving of occupancy rates in U.S. cities compared to pre-pandemic levels underscores the magnitude of this shift and its potential long-term implications for urban planning, real estate, and city economies.

The Road Ahead

As we navigate this new landscape, cities, and businesses are exploring creative solutions. Some are converting offices into residential spaces, while others are reimagining office designs to entice workers back. The future of our urban centers will likely involve a mix of these strategies, adapting to the changing needs of the workforce and the communities they serve.

When even the chief people officer at Zoom is excited about in-person office space, perhaps there is hope that office vacancies have already peaked. “What we’ve found is, people have enjoyed coming back to the office,” Zoom’s Matthew Saxon told NPR. “There is a buzz. There’s something about being able to go have lunch with your teammates.”

However, both imagination and investment are essential, even in the best scenarios. Years after the Covid pandemic, companies are still figuring out how to balance remote work with the advantages of office space — those that thrive may benefit from being bold and nimble.

Methodology

The Switch On Business team created these maps and analyzed the data using figures from Cushman & Wakefield MarkBeat U.S. National Quarterly Reports. They calculated the total square footage of empty office space by multiplying the total office space inventory by the vacancy rates. Then, they determined the lost value in each market by multiplying the empty office space figures by the asking rents (annual price in USD per square foot). This data is current as of July 2024.

As we continue to monitor this geographic shift in how we use our urban spaces, one thing is clear: the American office landscape is undergoing a profound transformation. By understanding these patterns and their causes, we can better prepare for the cities of tomorrow. For readers of our cartography and maps blog, this shift presents a fascinating study of urban evolution. We’re witnessing a real-time redrawing of our city centers, with potential ripple effects on everything from public transportation routes to residential patterns.