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And with the continued popularity of remote work, office buildings will become increasingly empty.
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Goldman Sachs estimates that vacant office space will jump by 267 million square feet over the next decade and beyond.
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A note said office leases would see a significant increase in expiration periods starting in 2030.
With telecommuting becoming more entrenched, real estate markets should prepare for lower demand for offices as leases expire over the next decade.
That’s according to a Goldman Sachs note, which found that the share of American workers who are at home has stabilized in a range of 20%-25%, below the pandemic peak of 47% but well above the pre-pandemic average of 2.6%.
As a result, the office space actually used is about half of pre-pandemic levels. So far, this has not yet translated into significant reductions in leased office space. In the past three years, the occupancy rate has dropped to just 86% from 90%.
However, this is about to change as the duration of commercial leases is on average between 4 and 7 years.
Goldman estimated that 17% of leased office space is set to expire by the end of 2024, with 11% expires in 2025, and more than 35% after 2030.
Even after assuming that further labor market rebalancing would reduce incentives for companies to offer work-from-home options, Goldman predicted a significant rise in office vacancies.
The analysis estimated that the expiration of leases would put pressure on office vacancies by 0.8 percentage points in 2024, 2.3 percentage points in 2025-2029, and 1.8 percentage points in 2030 and subsequent years.
That means vacant office space will jump by 267 million square feet over the next decade and beyond, according to Goldman Sachs. By comparison, 49 million square feet of new office construction was completed last year.
All that available space would reduce future investment in office structures by $6.4 billion in 2024 and $6 billion the following year, the memo said.
And these prospects come with the start of some high-profile companies Take a tougher stance on remote work. During the month of August, companies such as meta And Goldman Sachs They issued strict mandates to return to the office with threats of performance tracking or even termination of employees who did not come to the office often.
Even video conferencing company Zoom, which is a major enabler of remote work, has done so Some employees were asked to return to the office regularly.
Read the original article at Business interested
