Cities like New York, San Francisco and Chicago have millions of square feet of unused commercial space, yet in the midst of this, a new downtown is emerging.
America’s downtowns are in the doldrums.
As the Covid-19 pandemic began to fade and the U.S. economy began to boom, there was hope that a wave of return-to-office announcements would quickly revive downtown metropolitan centers that were hit hard by lockdowns. That hope even extended to some business centers that had never fully recovered from the great financial crisis of 2007-2008.
But the post-pandemic office revival appears to have plateaued, leaving cities with millions of square feet of unused commercial space.
Meanwhile, other “urban-esque” neighborhoods have sprung up — sometimes far from the traditional central business district — as most vibrant parts of many metropolitan economies.
“We have a big mismatch of space between what tenants want and what’s available,” said Phil Ryan, a director in the City Futures, Global Insight practice at the JLL real estate company.
“We have a huge undersupply of quality office space that’s hindering the return to work.”
Empty offices abound
Nationally, office real estate vacancies stand at 12.8%, the highest percentage since the Great Recession, according to data from CoStar, a commercial property information company. Other data shows it’s even higher — as high as 20%, according to JLL.
And it’s the largest cities with the biggest problems. In New York’s Manhattan, office vacancies are at a record high, Bloomberg reported last week, even as new properties come online, adding even more space to the struggling market. And in Los Angeles and Chicago, office vacancies sat at 22.5% as of the fourth quarter of 2022.
