In what is likely a historic first, the amount of office space in the U.S. is forecast to decline in 2023, according to Jones Lang LaSalle.
This would be the first net decline according to data going back to 2000, JLL says, and it’s likely the first decline ever.
National office inventory is believed to have never declined in the past, though it may have come close to doing so during the Great Depression.
A dearth of new construction and a large amount of office space being repurposed or destroyed accounts for the project decline this year. Less than five million sf of new office space has broken ground in the U.S. this year, while 14.7 million sf has been removed.
The post-pandemic work-from-home trend and the increased costs of borrowing have dampened the office market. Office delinquencies are on the rise, and property values in the office sector are falling.
Recent analysis from market research firm Trepp estimated average office building valuation declines from 52% for those constructed after 2000 to 60% for pre-1950 buildings. This sets “a gloomy tone” for the future office market, Trepp says.