April 2, 2024 (EIRNS)—Office building vacancy rates set records in the first quarter in several of the U.S. office real estate markets, as the office sector of the U.S. Commercial Real Estate (CRE) market is reeling. The total value of the CRE in 2023 was estimated to be $24 trillion. This market is at the heart of some major problems in the banking sector, including many of the large US. regional banks, and giant international banks, such as Deutsche Bank.
The vacancy rate in 9 of the leading 13 office market cities in the U.S. hit a record during the first quarter of 2024, reports Wolf Richter of the Wolf Street platform: Atlanta 29.6%; Downtown Chicago 28.6%; Silicon Valley 27.6%; Los Angeles 27.6%; Seattle, 26.9%; Philadelphia, 25.3%; Boston 23.0%; Washington DC, 22.6%; and Manhattan, 20.1%. The vacancy rate in San Francisco is 36.3%, but that’s not its highest. In an attempt to remove the stigma from the name vacancy, the real estate sector has dropped the term “vacancy rate” for a euphemistic “availability rate.” Yes, these buildings definitely have plentiful “availability.”
Part of the problem reflects the fact that the once hot speculative CRE market is no longer hot. Part of the problem reflects the action by many companies since the COVID pandemic in 2020, to have some (or more) of their workers working from home, and not in office buildings.
