Many cities across the US are experiencing high vacancy rates with Empty Office Buildings due to the pandemic’s impact.
With remote work and downsizing becoming more common for businesses, the demand for office space has decreased, leaving many buildings empty. So, we need to explore the factors that have contributed to this trend. Additionally, we should grasp the meaning behind the future of cities with the most vacant commercial properties.
On that note, we will point out the 5 US cities with the most empty office buildings. We will also discuss the unique benefits of living in those cities.
So, let’s get started…
Why Would You Live In A City With Lots Of Empty Office Buildings?
Most people may not deliberately choose to live in a city full of empty commercial buildings. However, there are a few reasons why individuals might choose to live in such cities. Some of the top reasons are:
- Affordability: Often, cities with a high number of vacant commercial buildings have lower real estate prices or rental rates. This makes housing more affordable for those who are looking to live in urban areas but have limited financial resources.
- Opportunity For Redevelopment: Empty commercial buildings present an opportunity for redevelopment and revitalization. People with a vision for repurposing these buildings into residential spaces, creative studios, or community centers may want to reside in such cities.
- Proximity To Amenities: Most of the time, cities with lots of empty commercial buildings are urban areas with existing infrastructure and amenities. Living in such cities can provide convenient access to a wide range of amenities and services that are not available in typical cities.
- Potential for Growth and Development: Cities with many empty commercial buildings may indicate an area having the potential for future growth and development. Individuals who are entrepreneurial or interested in starting businesses may see these cities as an opportunity to establish their ventures.
Top 5 US Cities With The Most Vacant Commercial Buildings
So, I guess you have learned a few benefits of living in a city with the most vacant office buildings. After comprehensive research, I have found the top 5 cities with the highest rate of vacant commercial spaces. Whether you are going to live in the following cities or not is up to you.
01. New York City, New York
During and after the Pandemic (COVID-19), office building vacancy rates in New York saw dramatic changes. Approximately 70% of workers who are also studying started to work from home. In addition, only 10% of the actual offices were occupied. During the COVID-19 pandemic, the number of vacant apartments in New York City increased significantly. This increase in residential vacancies put downward pressure on demand for commercial real estate.
Still today, after the post-pandemic period, New York has a 48.4% occupancy rate. You will be surprised to know that the city has 74,582,671 square feet of unoccupied office space. It is equivalent to filling over 26 Empire State Buildings’ worth of space.
In recent years, there has been a boom in commercial building construction in New York City. This has generated an oversupply of office space in some areas. This oversupply can lead to higher vacancy rates. Moreover, some companies shifted to more affordable options outside of New York due to high rent prices.
02. Washington, D.C.
Similar to other cities, the pandemic had a major impact on the office real estate market in Washington, D.C. As the seat of the federal government, Washington has a significant number of federal government agencies and contractors. However, in recent years, there has been a trend of downsizing within the federal government, especially due to COVID-19.
With the rise of remote work policies, some businesses have reduced their physical footprint in Washington. This made most of the federal buildings empty, making Washington a ghost town. The US Government Accountability Office recently discovered that almost 17 of the 24 state department headquarters in Washington are nearly empty.
The following chart (by the Wall Street Journal) demonstrates how the class-A office buildings in Washington compare to other states in terms of prices per square foot.
Moreover, new office buildings are constructed almost every year in Washington. This has resulted in an oversupply of office space. Some people may see this as a scope for converting downtown offices into residential apartments. For instance, Mayor Muriel E. Bowser has taken on a project to ensure housing for 15,000 residents in Washington by turning office buildings into residential properties.
03. Port Orange, Florida
I have added a chart showing the asking prices for commercial properties in Port Orange, Florida. Although the chart derives its data from January 2014, current market conditions are likely not very different. Anyway, the idea of inserting this chart is to give you an overall insight into the asking prices of office buildings in Port Orange.
As you can see from the chart, the asking prices for offices in the state, metro, county, and city of Port Orange were gradually decreasing. Commercial properties, such as retail centers, office buildings, and industrial spaces, can contribute to the local economy. However, this is not the scenario in Port Orange.
Since the number and price of commercial properties in Port Orange are dropping, the value of residential properties is also falling. That is because the residential and commercial real estate markets are often interconnected. Currently, the median home price is around $335,750, which is 8.9% less year over year.
So, as an investor, you may consider the residential houses in Port Orange for future investments. You should know that the city’s economy is primarily driven by residential or service-based industries. In addition, home prices in this area may increase in the future because of the high probability of industrial growth. Therefore, you can expect a generous profit from the houses you invest in.
04. Chicago, Illinois
Many factors contribute to the high vacancy rates for commercial buildings in Chicago. The city faced a major impact from COVID-19. Like most cities in the US, workers started to work from home during the pandemic period. This tradition has not changed much in Chicago, as the vacancy rate here has only recovered to 50% of pre-pandemic levels.
Chicago has some of the highest property tax rates in the country. This can lead to higher costs for businesses. Also, most commercial spaces in this city come with an agreement for a 10-year lease. So, it is more difficult for individuals to justify leasing office space in the city. As a result, many businesses are relocating from Chicago to other areas with lower costs of living or better tax incentives.
In some neighborhoods in Chicago, there are concerns about crime and safety. Normally, those areas are less desirable for businesses. With that said, the vacancy rate in some areas, such as River North, Fulton Market, and the West Loop, is increasing. Recently, business personnel have been buying or leasing warehouses and multifamily residential homes in those areas.
05. Dallas, Texas
Due to the boom in the local gas and oil industries, Dallas and its nearby cities have seen significant economic growth. However, there was a collapse in oil prices in 2014, 2015, and 2016. Local employers were very upset because of this and left the city. Hence, Dallas has been carrying double-digit vacancy rates for commercial properties for decades. The Texas Real Estate Research Center has forecast that,
Rent prices are already high in Dallas, which will continue to rise, leaving vacancy rates in the single digits.
The following graphical presentation from Statista shows the vacancy rates of the big-box industrial centers in Dallas from 2011 to 2022.
More workers left, and some started working from home during the pandemic. Building owners were left with headaches over how to repurpose excess office space. They started converting office spaces into living apartments. For example, the owners of Energy Plaza and Republic Center II Towers began redeveloping their properties into residential properties.
The downtown areas of Dallas are fast growing. As a result, redevelopments converting commercial spaces into residential spaces became common in those areas. Commercial towers struggled with space, and most of them started as rental housing. Around 1,000 new apartments were established as a result of this. Moreover, the office-vacancy rate in Dallas is high—roughly 25%. All these factors have lowered the vacancy rate and skyrocketed the price of single-family homes.
If you have come this far, you should have a strong knowledge of the number of vacant office buildings in the above cities. You should also understand why these cities have more empty office buildings than other cities in the US. Now, it depends on you whether you want to go to these cities to live or not.