The Office Market Reckoning is Nigh

Occupied space, rents, sales transactions volumes, and sales prices were all posting record levels, while vacancy rates had fallen to their lowest level since the Great Financial Crisis (GFC). Few firms went bankrupt as generous government relief programs kept them solvent. [...]most office tenants could only exit their leases once their lease period ended. The office vacancy rate has risen over 400 basis points to 15.7%, the largest Increase In any property sector since 2019.3 A Smaller Corporate Footprint For now, the vacancy rate remains below Its GFC peak, but all signs suggest that vacancies will continue rising In the coming quarters to reach record levels as tenants give up more space than they lease. Most of that space will eventually be counted as vacant landlord space once the leases roll from the tenants' responsibility. [...]expect vacancy rates to spike over the next two years unless firms abruptly begin to lease more space than they have been.

Commercial Real Estate Market at a Crossroads: The Impact of COVID-19 and the Implications to Future Cities

This paper aims to examine the responses of commercial real estate markets to COVID-19 and the implications for post-pandemic cities. Using data of Florida’s metropolitan areas in a fixed effect regression model, we find that sales volumes of retail properties decline instantly under the shock of COVID-19 but are followed by a strong recovery after one quarter. Meanwhile, COVID-19 depresses the growth rate of rent for office property, but the impact is short-term, and the office rental market bounces back to about 70 percent one quarter later. In comparison, industrial properties witness a rise in the growth rate of sales and rent price. Results indicate that urban planners may consider adjusting the amount of lands allocated to different usages to meet the evolving demands of urban space in the post-pandemic era.