Future Cities

Nowhere to hide from rising office vacancy

Chart of the Week

December 8, 2023

Chart of the Week

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The effects of remote work on office demand are pervasive, but are especially pronounced in large, urban office markets like Los Angeles, San Francisco and Manhattan with high commuting costs (both time and money).

Yet many high-growth Sun Belt markets with more manageable commute times have also seen an uptick in office vacancy. More than remote work, the culprit here has been robust supply deliveries. Over the past five years, inventory has grown by 16% in Austin and more than 8% in Salt Lake City, Charlotte, San Jose and Nashville.

Only six office markets tracked by CBRE EA have lower vacancy than they did in 2020. South Florida appears prominently as it attracts businesses and residences at a strong pace. Also faring well are smaller markets like Albany that are dominated by the public sector or Las Vegas and Albuquerque that largely cater to local tenants that may favor an in-person office culture. This is also likely true of smaller cities (not shown on the chart), such as Milwaukee, Riverside and Honolulu, where the vacancy rate has increased only marginally since 2020.

Figure 1: Market Vacancy Change Since Q1 2020 (Basis Points)

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Source: CBRE Econometric Advisors.