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The transition to remote and hybrid work will drive U.S. office vacancies 55 percent above pre-COVID levels and leave 1.1 billion square feet of office space unused by 2030, according to a new study by real estate services firm Cushman & Wakefield.

About 330 million square feet will fall vacant because of the new work pattern. Another 740 million will sit empty because the buildings are aging, lack key amenities, or need “significant upgrades” to refurbish or repurpose them, the study said.

About 25 percent of U.S. office space has become “undesirable,” while another 60 percent risks obsolescence without major investment, the firm warned.

Rising interest rates are making it much harder, and in many cases impossible, to finance upgrades that would make older buildings competitive with new ones as tenants seek the most alluring spaces at the cheapest rates.

“Obsolescence is the word of the day right now,” Cushman president Andrew McDonald said in comments quoted by the Financial Times, adding that the U.S. office real estate market has reached “an inflection point.”

Only a third of office leases due to expire between 2020 and 2030 have run out. That means landlords likely will see a steady wave of tenants cutting back their space or leaving for more attractive buildings or better lease terms.

“The trend is downward, but the magnitude of the shift is still in flux,” Cushman’s chief economist Kevin Thorpe said in comments quoted by the FT.

One measure of the magnitude: “Friday [in the office] is dead forever” and “Monday is touch and go,” Steven Roth, president of the Vornado Realty Trust, said in an earnings call earlier this month.

Vornado’s plan to build several new office towers around Penn Station in Manhattan is now “almost impossible” to finance, Roth admitted.

While the U.S. is the chief victim of the office building bust so far, it is also underway in Asia and Europe, Cushman’s report noted.

TRENDPOST: We have long detailed the implosion of the office real estate industry in a series of reports, including:

● “Commercial Real Estate in a Tailspin” (20 Oct 2020)

● “Deloitte Abandons More London Office Space” (26 Apr 2022)

● “GM Softens Back-to-the-Office Requirement After Worker Backlash”(4 Oct 2022)

● “Business Office Bust Begins to Bite” (20 Dec 2022)

● “New York City’s Workforce Sharply Shrinking” (24 Jan 2023)

● “Office Occupancy Half of What It Used to Be” (7 Feb 2023)

TREND FORECAST: As we forecast in our Top Trend for 2023 (3 Jan 2023) this next phase in the office building bust, the office property crisis is accelerating as landlords face stiffer competition to get and keep tenants, wrangle with local governments to try to minimize their tax assessments, and see their margins shrink—many to the point of disappearing.

And for many with adjustable rate mortgages, the higher interest rates rise, the more they have to pay on their loans.

To survive, many landlords will let go of older buildings needing maintenance or repairs, either offering them at fire-sale prices or handing the keys back to lenders.

Property owners will consolidate, those having deep pockets or access to cash buying up others for cheap.

As property values are reassessed downward, cities will confront hard decisions about which workers and services to cut. 

And as for converting offices into residential apartments and/or condominiums, as we have noted in previous issues of The Trends Journal, thousands of office buildings, especially older ones, across the U.S., are not eligible for that kind of salvation for reasons we explained in “Plan to Turn New York’s Vacant Hotels To Housing Not Working” (5 Apr 2022) and “Wall Street, Dead Street. Office Buildings Going Condo” (28 Jun 2022).


Columbia Property Trust, a division of private equity giant Pacific Investment Management, has defaulted on $1.7 billion worth of mortgages on seven office towers in Boston, Jersey City, New York, and San Francisco.

The mortgages carried adjustable interest rates, causing monthly payments to skyrocket through 2022 as the U.S. Federal Reserve steadily raised its benchmark interest rate.

The seven buildings were appraised at $2.27 billion in 2021. Citigroup, Deutsche Bank, and Goldman Sachs made the original mortgage loans, totaling about $1.9 billion.

“We, like most office owners, are addressing the unique and unprecedented challenges currently facing our asset class and customer base,” Columbia spokesperson Justina Lombardo told Bloomberg. 

“We have engaged with our lenders on a restructuring…we look forward to a collaborative process yielding thoughtful solutions that reflect current market conditions,” she added.

Older office buildings that need to be refurbished to compete with newer digs with more amenities are in particular trouble, as current high interest rates make those investments impractical, as we reported in “Study: One Billion Square Feet of Office Space Will Be Empty by 2030” in this issue.

The value of those older, troubled properties has fallen an average of 20 percent since March 2020, real estate research firm Green Street noted.

TREND FORECAST: These defaults are another step along the office real estate industry’s downward path, following Brookfield Corp.’s default on $755 million worth of loans, which we detailed in “Top Private Equity Firm Defaults on Two Office Tower Loans” (21 Feb 2023).

As we wrote then, these defaults are harbingers of the mounting crisis facing landlords that we explained in our Top Trend 2023 (3 Jan 2023) forecast of this next phase in the office building bust: owners of older buildings needing maintenance and repairs will increasingly dump their properties for rock-bottom prices or simply default.

Owners lucky enough to hold newer, more desirable properties still will have to compete for tenants by offering free months’ rent, free redecoration, and other perks.

The office real estate business will recede to become a niche in real estate investing, not the cornerstone it has been for the last century.


The Corner Bakery, a chain of casual dining spots with 140 locations across 20 U.S. states, declared Chapter 11 bankruptcy last week after a lender threatened to foreclose.

The 31-year-old company blamed the office building bust, one of our Top Trends for 2023, for its failure. Its restaurants derived much of their revenue from commuters stopping in for breakfast and lunch, it said.

Sales crashed during the COVID War and never recovered after the work-from-home trend became permanent.

The chain also has been beset by higher wages to recruit and keep workers, rising costs for foods, and landlords who ran out of patience after COVID-era federal relief funds dried up, company founder Jignesh Pandya said in comments cited by The Wall Street Journal.

Corner Bakery was negotiating with lenders to restructure a $20-million loan when the lenders sold the loan to SSCP Restaurant Investors LLC, which then halted negotiations and began foreclosure proceedings.

TRENDPOST: We are noting this company’s demise to mark yet another casualty of the office building bust and as a harbinger that the worst is yet to come.

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