Office building vacancy rates are seeing a surge

Be it Asia, the UK or New York City, office building vacancy rates have skyrocketed after the pandemic, thanks to the work-from-home or hybrid work model.

The result? Vacant office buildings in prime locations. A Columbia University and New York University study claims that lower tenant demand may cut the value of offices across the country by 28%, or $456 billion. About 10% of that would be in New York City alone, per Bloomberg.

The pandemic is one part of the problem. Organizations are also trying to lure in employees by moving to newly-constructed offices with several amenities—clubhouse, open terrace, panoramic view of the city—for the same rentals. 

According to Bloomberg, “KKR & Co. and BlackRock Inc. are shifting their headquarters to Related Cos. and Oxford Properties’ Hudson Yards mega-development, while Wells Fargo & Co. relocated its New York corporate and investment banking business to the area.”

Building owners are left with two choices—renovate their old buildings to compete with the new glassy skyscrapers or convert their commercial properties into residential complexes. Both are expensive options. But the other prospect is to let the space stay unoccupied, without any rental income, and pay the debt they incurred for the building from their own pockets.