While many employees are enjoying the benefits of working from home, city landlords are fighting a losing battle against the home office. But why?
Most offices have not yet returned to normal since the pandemic uprooted our lives. According to employee swipe-card data from Kastle Systems, occupancy in the biggest US office markets has decreased to almost half pre-epidemic levels.
Vacancy rates are rising as businesses vacate space when their leases are up for renewal. According to research, 16.9% of US offices were empty in the second quarter of this year.
One solution is converting office spaces into badly needed homes. In the second quarter, the vacancy rate for multifamily rental housing in the US was just 3.1%. The likelihood of converting offices into residences is increasing as a result of the rise in residential rentals.
Conversions, however, can be tricky. Larger offices are hard to convert into residences because they lack natural light in the center of their large floors, making them unsuitable for living. This could also lead to around 20% loss of the lettable building area because unlike office occupants, residential tenants do not pay rent for common areas like hallways.
Offices, therefore, must be cheap relative to residential property for them to be profitable.