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Charted: Office vacancies hit a new record high


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Office vacancies hit a record high in the fourth quarter of last year, surpassing previous peaks last reached in 1991 and 1986, according to data from Moody's Analytics out Monday.

Why it matters: Office buildings are emptying around the U.S., as companies continue to adapt to the new norms of remote and hybrid work by shrinking their physical footprints.

  • The transition marks an enormous societal shift as Americans adjust to a whole new way of working and living — big changes are underfoot in cities and suburbs around the country.
  • Yet it's happening so slowly and in such a predictable fashion, that the impact on the overall economy so far has been minimal.

State of play: The stickiness of hybrid work arrangements "muted office demand," per the report, which says 2023 was "the most downbeat" year in the office sector since the global financial crisis.

  • "Even though 2023 was largely a year of companies and organizations calling people back into the office, we're not seeing that it's typically the standard five days a week back," said Nick Luettke, an associate economist at Moody's Analytics CRE. "Hybrid models and flexibility [has] really become the name of the game."

Zoom out: Unlike past crises, vacancies increased last year while the economy was in good shape overall.

  • "If the soft landing is pulled off, [vacancy] numbers are probably not going to rise to much higher than this," Luettke said. "But if things do take a turn for the worst in 2024, it'll probably just keep going for much of the year.":snip:
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