DC area near the top for wasted office space

Across the country, businesses continue to lose offices during the pandemic’s home shift.

Across the country, businesses continue to lose offices during the pandemic’s home shift.

Between Q2 2020 and Q2 2021, the negative net absorption of commercial office space, or returned space, was 144 million square feet, according to a National Association quarterly commercial real estate report. of Realtors.

The DC area ranks second after the New York subway for the amount of abandoned office space in the past year.

“It’s not just the DC market that has given up a lot of office space,” said Gay Cororaton, NAR senior economist and director of business research.

Many “gateway cities” also have them, such as New York, San Francisco, Chicago and LA.

“The New York area alone ceded 22 million square feet of space and the DC area ceded 8.5 million,” Cororaton said.

A separate report released this spring by commercial real estate company CBRE showed 1.1 million square feet of negative net absorption in the DC area office market in the first quarter alone, the biggest loss of occupancy on record. over a quarter. CBRE now reports that the office vacancy rate in the district in the third quarter has exceeded 18% for the first time.

The reason is exactly what the real estate industry predicted the pandemic would be caused by the pandemic: businesses no longer need space.

“Those who are in IT, technology, finance, mathematics… half of them still work from home against around 12.5% ​​before the pandemic. So really, there is no use right now for that office space, ”Cororaton said.

As a result, average office rents in many markets, including the DC area, are falling. The association reports that in the second quarter, the average office rental rate in the DC metro was down 1.2% from a year earlier.

The problem will be compounded by the large amount of new offices under construction. In the DC area, there were 9.4 million square feet of office space under construction in the second quarter, behind New York, Boston and Seattle.

The great return to the office is not universal. Among the major cities, Austin, Salt Lake City, Miami and San Antonio have all seen an increase in the number of rented office space over the past year, and office rents have increased year over year. in 365 of the 380 metropolitan areas monitored. by CoStar, mainly the secondary and tertiary markets.

The association’s quarterly report, which also tracks trends in multi-family, industrial, commercial and hotel real estate, is published online.

EDITOR’S NOTE: This story has been edited to reflect the correct quarter in which CD vacancy rates exceeded 18%.

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