Empty Space: Office Building Prices Drop Across Major US Cities

Prices for office buildings across the United States remain low after eighteen months of the COVID-19 pandemic, including in its most expensive cities.

According to a new report from real estate data firm CommercialEdge, average sale prices dropped to $284 a square foot on office buildings in central business districts nationwide this year. This comes after prices hit a peak of $400 a square foot in 2019 and $379 in 2020.

Despite the dip in price, CommercialEdge, which produced its analysis after examining office building sales of 50,000 square feet and above, suggested that office building sales may be on track to outpace transactions from last year. The firm tracked $36.9 billion in office transactions in July, which was well below pre-pandemic years, but is a sign that total sales will surpass those from 2020. Overall, there is hope this is a sign buyers have interest in future high-potential office assets.

CommercialEdge also took a look at vacancy rates when making the analysis. It found that vacancies across the 50 top office markets in the U.S. stood at 15.9 percent, over 190 basis points higher than where it was last year at the same time. However, this score was 10 points lower than where it was in June, which suggests a slowdown in companies returning to the office, something that has in fact been the case with the latest surge in COVID-19 cases from the Delta variant.

With Delta’s spread, employers are pushing back plans further, which could slow down any rise in office building prices. Some large firms, including Apple and Amazon, are not expecting to recall employees until at least next year, when they hope the pandemic will come under better control. Meanwhile, Facebook is preparing to let workers continue to work from home indefinitely even after the pandemic subsides.

This delay has worried some managers, who fear a new period of disruption as workers begin to readjust once again to working from an office. A large number of remote workers were similarly found to be reluctant to continue office work after over a year of working from home.

The report faults weaker-than-anticipated vaccination rates across the U.S. as well as an increase in hospitalizations from the Delta variant as responsible for decisions to delay returning to the office.