The Trickle-Down Effect Of Too Many Empty Office Buildings
35 percent of employees worked from home in 2023, up from 34 percent in 2022, according to BLS.
By Peter List, Editor | June 27, 2024
While office vacancy rates that continue to plague commercial property owners in downtowns across America may not garner much public sympathy, most do not think of the impact to workers—both union and non-union—who are impacted.
"The worst crime against working people is a company which fails to operate at a profit." — Samuel Gompers, Founder, American Federation of Labor
According to the San Francisco Standard on Wednesday, the “latest preliminary data from commercial real estate firm CBRE showed the city’s struggling office market has again hit a dismal new low in the second quarter, clocking in at 37% vacancy, up slightly from 36.7% in the first quarter of 2024.”
Although this differs from other sources, which paint a less bleak picture of San Francisco’s vacancy rate, even a vacancy rate of 25 percent, as noted by Commercial Edge can be consequential.
Though San Francisco may be the extreme example, on Thursday, Bloomberg reported that ”nearly one-quarter of all US office space will be vacant by 2026 as working from home persists, slicing commercial-property values by as much as $250 billion, according to a report from Moody’s.”
Neither publication, though, addresses the impact on workers affected by empty offices and work-from-home policies.
Working From Home Trends Stay Steady
The work-from-home (WFH) phenomenon that began during the pandemic continues to plague commercial real estate owners today.
The share of employed people who spent time working at home on days worked was about the same in 2023 (35 percent) as in 2022 (34 percent) the U.S. Bureau of Labor Statistics reported on Thursday.
Remote work “tends to be dominated by higher-educated employees, with nearly 40% of those holding advanced degrees hybrid or fully remote,” according to U.S. News.
Many other workers, though, do not have the luxury of working from home. From the union maintenance and cleaning personnel to the retail space and restaurant workers, their livelihoods depend on fully rented office real estate that is teeming with tenant activity.
“Almost all U.S. cities have been hit hard by workers turning away from downtown offices, but few have been hit harder than Washington,” reported the New York Times in May.
Washington, of course, is home to the federal government, where government workers have been reluctant to return to the office.
Despite the fact that, in addition to restaurant and retail jobs in Washington, many unionized workers clean and maintain federal office buildings, the “federal government’s mission is not to provide customers for restaurants and stores,” Jacqueline Simon, the policy director for the American Federation of Government Employees (AFGE) told the Times.
The clock is ticking.
Over “$1.5 trillion of commercial real estate debt is coming due by 2025,” noted the The Kobeissi Letter last year. “Most of this debt is held by regional banks and vacant properties are struggling to pay the debt.”
If defaults begin to occur on the total estimated $4.7 trillion pile of outstanding commercial real-estate loans (38% of which reside at U.S. banks), it will impact more than the bankers backing the loans.
It will have a trickle-down effect that may go well beyond the vacant office buildings in cities across America.
This post is an update to last year’s post: ‘A Crisis in the Making: How crime and 'return to work resistance' hurts low-wage workers, minorities and union members.’
