They are as empty as ever and represent a collapse for the real estate sector.

• Offices record lowest occupancy levels in 40 years

• Hybrid work has slowed the decline thanks to a partial return to the office, but companies now need less office space.

The pandemic has forced companies to empty their offices, but the benefits of remote work have delayed companies’ plans to fill them again.

Employees’ refusal to move away from a remote work model that allowed them to continue doing their jobs while improving family balance and flexible scheduling has left offices emptier than ever. And this is a disaster for the real estate sector.

Large investment funds, real estate companies and even the companies that use them have poured huge sums of money into office buildings that are now underutilized. lack of occupancy and loss of market value. This pushes them to try to replenish them at any cost.

The profitability of the real estate market is the basis on which many of the major companies’ plans to return to offices are formulated, given that data has confirmed that the location from which a person works does not affect or influence the productivity of companies. about the functioning of their business models.

Empty offices at competitive prices

Resiclub Analytics In February, it was reported that Paramount Group, one of the largest office owners in New York, was exploring the possibility of transferring ownership of two important office complexes in San Francisco, burdened by the debt that the properties would generate. The real estate company told its shareholders that the market value of buildings has fallen below the amount of debt that they had entered into a contract to purchase them.

Paramount Group paid $1 billion in 2019 for both office complexes, but it is currently only 45% occupied and its value has plummeted.

Paramount Group office complexes are not just something. One of them served as the headquarters of the energy company Chevron, and the other is even larger and located in the center of San Francisco. Therefore, they can be considered a good thermometer for assessing The situation in the office real estate sector in the USA.

Report Moody’s Investor Services published this week suggest that average office vacancy in the US reaches 19.6%as published Wall Street Magazine. This is the lowest level recorded in the last 40 years. Thomas P. LaSalvia, Reporting Officer Moody

noted that “communications technology has advanced to such an extent that offices and cities have become obsolete.”

The data is exacerbated in areas heavily influenced by the tech sector, which was previously considered a reliable tenant as it tended to use larger spaces for its offices but now leaves its nerve centers in California and Texas with vacancy rates of up to 25%. That is, every fourth office is empty.

The reason why these regions with the largest tech sector presence now have the highest unemployment rates is because they tech companies that have chosen remote work the most. Those who wanted to return to offices chose hybrid work models, so they now need less office space.

Low building occupancy caused rental values ​​to fall 1.5% between the fourth quarter of 2019 and the same period in 2023. However, this fall in rental prices does not affect the huge real estate investments that large companies are making in real estate. like Google, created on their huge campuses.

Are Very expensive capacity is now underutilized due to the advent of remote work.and companies demonstrate the sunk cost fallacy by seeking to recoup their investments at any cost, even when the price paid is general dissatisfaction among employees forced to return to offices.

In Hatak | Rich Spaniards do not buy office buildings: it is more profitable to invest in a real estate company that has them.

Image | Pexels (Miguel Cuenca)