About 52% of companies expect to shrink their office space over the next three years, up from 44% a year earlier, a recent CBRE survey among 185 businesses with U.S. offices found. That’s compared with 39% that intend to expand, up from 29% a year earlier, and 9% that foresee no change, down from 27% a year earlier.
Employees resisting returning to the office adds fuel to the fire.
I tried looking for this weakness quite recently. The lease on my office expired at the beginning of this year and the new landlord was looking for a 30%+ increase in the rent. So I declined to renew and began looking for different space.
What I found was not a lot of vacancies, and prices continuing to rise. So I moved my business back into my house, where it began over a decade ago. I’m saving a bundle on rent, and a little more on commuting costs. (My old office was less than 10 miles from home, so a reasonably short and quick commute.) The vacancies I did find were mainly in higher end buildings, with premium rents. The lower end of the market was still pretty full.
So my thought on office REITs would be to take a close look at the quality level of the buildings the REIT owns. Those who deal in high end properties are likely to take a bigger hit than those with lower level buildings and lower per-foot rents.
As a side note, when the new landlord bought the building a couple of years ago, it was about 90% full. When I left, occupancy was closer to 50% and not a single vacancy had been filled by the new owner. In talking with the property manager, I mentioned this and got a stock reply (they need to see a return on their investment) along with a knowing eye-roll. She knew they were overpriced and stubborn, but what can she do when they are giving the marching orders?