US office vacancy rate jumps to record high
According to Moody's, US office vacancies rose to a record in the fourth quarter of 2023, «shattering the previous record.»
The office space surplus follows a significant shift in working habits following the COVID-19 pandemic, with more people working from home or utilizing the possibility of a hybrid work environment.
In addition, with more people working from home, new construction added 24,474,000 square feet of office space since the beginning of the year, well below Moody's initial estimate and the lowest since 2012.
The firm said the national office vacancy rate rose by 40 bps to a record-breaking 19.6%, smashing the previous record of 19.3%, which has been set twice previously in 1986 and 1891.
In addition, the rise in the office vacancy rate represents the most significant quarterly increase since Q1 2021, putting the latest office vacancy 280 bps higher than its pre-pandemic level.
However, some office spaces are gaining attention, with new Class A properties that offer flexible or smaller configurations being «particularly attractive to tenants who decided to keep the physical office footprint for branding, purposeful gathering, training, and collaboration purposes.» In addition, Moody's said suburban offices were more sought after due to their proximity to local communities and, in some cases, shorter commute times.
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