Commercial Real Estate
The U.S. office vacancy rate is officially record-breaking.
Moody Analytics reports an office vacancy rate of 19.8% for Q1 2024 – 50 bps above previous record years 1986 and 1991.
That’s right.
We haven’t seen office parks this empty since Top Gun hit theaters, and Bon Jovi, Janet Jackson, and Metallica ruled the airwaves.
Where we could once anticipate full parking garages, bustling cubicles of chatter, and vibrant company-wide presentations, we’re now left with a tumbleweed of lost corporate dreams, empty conference rooms, and dulled fluorescents, no longer shining a light on the dozens of individuals mandated to commute in five days a week for their forty on the dot.
The tides of middle management are changing. Post-pandemic conditions have embraced remote work. And while just 12% of full-time employees were working remotely in 2023, that number is expected to jump to over 32 million Americans by 2025.
The punchline? Work from home may just be here to stay.
A side effect? The rising vacancies of office parks and corporate structures.
And let’s tell it like it is.
This increased number of empty office chairs, uptick in stillness, and tidal wave of noiseless corridors, unfilled elevators, drawn blinds, and open unused space means an uphill challenge for everyday commercial realtors.
Just how does this impact you and your roster of corporate clients?
We’ve got bad news and good news.
Let’s break down the information first in order to equip you on the status of the market, then we’ll make sure to provide you guidance on how to effectively pivot.
Already know the landscape? Jump ahead to our core strategy and recommendations.
Want an updated refresher on the slow drip of empty space and abstraction impacting corporate culture and in-person work environments? Read on.
The Growing Gaps Of In-Office Working
COVID drove us indoors, and it turns out we liked it enough to stay.
Maybe it was the worldwide average of 72 minutes normally spent commuting saved each day or the fact that remote workers are seeing an average of $12,000 saved per year, with expenses such as gas and office attire completely slashed.
Or it could be that 90% of remote workers have stated this new approach has had a positive impact on their mental health, according to the U.S. Career Institute.
And it turns out these benefits that are convincing more and more workers to ditch their slacks and break out their Peletons in the comforts of their own home office, aren’t only benefiting the employees.
According to the same U.S. Career Institute report, companies with fifty employees could save half a million dollars annually just by going remote (with over $10,000 per employee back in their budgets).
And with the option to work remotely now the most important aspect of a job for the nearly two-thirds of employees surveyed, it’s no wonder why many organizations are bending over backward to make this a scalable option for their workforce moving forward.
But with HR’s WFH stamp of approval comes the corresponding aftermath that has left so many office buildings and commercial real estate centers empty in recent years. In fact, if these patterns continue, Cushman & Wakefield report this supply and demand issue will leave 330 million square feet of vacant office space unused by the end of the decade.
If you think the problem is as easy as electing not to renew a commercial real estate lease? Think again.
Turns out, 2/3 of the decade’s lease expiries haven’t hit just yet. Meaning leases are filled and companies are footing the bill for empty desks and unused space – burning money where they don’t need to and desperately seeking solutions.
And while some organizations have resorted to rolling back the welcome mat on WFH freedoms (think return-to-office mandates from big names like Google, Goldman Sachs, JPMorgan, and more), others are trying to make it work.
With over 95% of modern employees wanting some form of WFH, this search for commercial remedies is as vital (and timely) as ever.
How Companies Are Pivoting
The working landscape looks a whole lot different than it did five years ago. And companies are facing tough decisions on how to keep employees happy all while reimagining their physical footprint in the corporate space.
Patterns already emerging?
Organizations are transitioning away from longer-term leases and larger spaces no longer needed. They’re seeking work environments that can meet employees in the middle, who may be looking for a space outside of the home but one that’s still a far cry from the stale, ultra-professional landscapes of years past.
Gone are the paper-pushing days of Dunder Mifflin look-a-likes and the bland prismatic landscapes of gray Office Space cubicles.
Companies are looking for smaller spaces with less pull on their bottom line and options that offer flexibility. Fewer and fewer are heading toward larger traditional deals, and more are embracing shared and coworking spaces.
In partnership with property owners, companies may elect to repurpose or reconfigure current space. With emphasis on collaborative environments, enhanced use of technology, and spaces suitable for hybrid working, it’s an era of transformation in commercial real estate.
And you better get on the train if you want to survive.
How Commercial Realtors and Investors Can Adapt
Just because some of the more reliable, traditional deals may be fewer and far between these days in the commercial space doesn’t mean they’re absent from the market.
So, how can you adapt to a rapidly changing market? Read some of our top suggestions below:
- Reach out to corporate tenants who hold long-term leases in your community. Whether or not they are locked into their current lease, they may also be exploring additional smaller spaces in varying locations in order to give hybrid employees additional options with less commuting time.
- Connect with property owners who have owned local commercial real estate for extended periods of time. Many of these spaces may not have been recently updated. Therefore, tired landlords may be open to selling in order to offload the responsibility of large renovations or due to the cost of upkeep with a dwindling number of leases.
- Consider investment in smaller, hybrid spaces where location is key. Looking to diversify your portfolio? Organizations aren’t the only ones looking for flexible workspaces. Employees are craving options outside of the home that allow for communication and collaboration with others. If there are property options that currently fit (or could fit this mold with some work), you may want to consider investment. However, use caution to keep up with the market. Get project estimates and exit value assumptions.
- Be ready to walk organizations through how they could modernize potential workspaces. Helping your corporate clients find new HQ destinations? Keep the trends you’ve read today in mind. Aid your buyers in visualizing how a setting could look with a blend of private and public offices, shared workspaces, and plenty of communal areas. For hybrid workers, embrace homestyle environments so employees can work alone or with others. Don’t forget enhanced, state-of-the-art amenities and general upgrades that can tease hybrid workers to make more in-person appearances.
- Own commercial property yourself? Consider adaptive reuse. If you’ve personally felt the brutal reality of a lighter corporate footprint on owned properties, we’ve got a few thoughts. If you’ve got the location but lack the tenants, consider altering the structure and use of your building. Adapt to a coworking space, a co-living space, or blend multiple purposes together to amplify your chances of securing a lease. You could end with a property that’s part residential and part commercial.
While the above can help you tremendously, there’s one reality we haven’t doubled down on just yet. The fact that you need more leads to survive this shift. And it’s about time you generated them yourself.
Using The Power Of Public Records To Win Your Next Commercial Leads
Not sure how to find the tenants and commercial property owners you need? Unsure how to target specific spaces that you could reimagine to make profitable coworking hotspots?
We got you.
You need public records data, the unmatched resource for accuracy and timeliness that can provide expansive insights into properties, communities, demographics, and more.
While we’ve previously highlighted multiple methods to leverage this invaluable information, our top recommendation is utilizing lead generation platforms, which can productively surface targeted information to you from the vast catalogs of data, saving you time and money.
And PropertyRadar just so happens to be the best of the best.
Search over 150 million properties and over 250 million people and gain access to over 1 billion prospective client phones and emails in order to productively reach the commercial owners and tenants you need to.
Get hypertargeted with the most advanced and specific filtering system available, so you can find the exact people and properties you need, making your outreach and offers personalized, relevant, and effective.
So, what are you waiting for?
Get started now with a free PropertyRadar trial, and uncover over 150 million properties that could be the key to your next commercial client.
