Companies across the country continue to shed office space in the pandemic’s work-from-home shift.
Between the second quarter of 2020 and the second quarter of 2021, the negative net absorption of commercial office space, or space given back, was 144 million square feet, according to a quarterly commercial real estate report from the National Association of Realtors.
The D.C. region ranks second only to the New York City metro for the amount of office space given up over the last year.
“It is not just the D.C. market that has given up a lot of office space,” said Gay Cororaton, NAR senior economist and director of commercial research.
Many “gateway cities” have too, such as New York, San Francisco, Chicago, and L.A.
“The New York area alone gave up 22 million square feet of space and the D.C. area gave up 8 1/2 million,” Cororaton said.
A separate report this spring by commercial real estate firm CBRE showed 1.1 million square feet of negative net absorption in the D.C. area office market in the first quarter alone, the largest singe-quarter occupancy loss on record. CBRE now reports the office vacancy rate in the District in the third quarter topped 18% for the first time ever.
The reason is just what the real estate industry predicted would be caused by the pandemic: Companies don’t need the space anymore.
“Those who are in computer, technical, finance, mathematical … half of them are still working at home compared to about 12.5% prior to the pandemic. So really, there is no use right now for that office space,” Cororaton said.
Average rents for office space in many markets, including the D.C. region, are being pulled down as a result. The association reports that in the second quarter, the average office rent rate in the D.C. metro was down 1.2% from a year earlier.
Compounding the problem will be the large amount of new office space under construction. In the D.C. area, there was 9.4 million square feet of office space under construction in the second quarter, ranked behind only New York, Boston and Seattle.
The great office give back is not universal. Among large cities, Austin, Salt Lake City, Miami and San Antonio have all seen a rise in office space being leased in the last year, and office rents are up on a year-over-year basis in 365 out of 380 metro areas tracked by CoStar, mostly secondary and tertiary markets.
The association’s quarterly report, which also tracks multifamily, industrial, retail and hotel real estate trends, is posted online.
EDITOR’S NOTE: This story has been changed to indicate the correct quarter in which D.C. vacancy rates topped 18%.