As demand for hybrid office environments continues to evolve, the US office vacancy rate hit a new high in the first quarter.
The Zhitong Finance App learned that as demand for hybrid office environments continues to evolve, the US office vacancy rate reached a new high in the first quarter.
Moody's said in a preliminary report Monday that the vacancy rate rose to a record 19.8% from 19.6% in the fourth quarter of 2023. Despite an increase in vacancy rates, the credit rating agency said early data showed stable quarterly performance for commercial real estate.
As the hybrid work model shows greater staying power, tenants continue to scale down and impact the office industry. The Federal Reserve's rate hike cycle is also hurting commercial real estate. According to Moody's data, the industry's plight has caused the vacancy rate to exceed historical peaks in 1986 and 1991, and there may be room for further increase.
“The pressure on office buildings has not been completely eliminated,” Thomas LaSalvia, head of commercial real estate economics at Moody's and one of the report's authors, said in an interview on Tuesday. However, he also pointed out that recent positive economic indicators will help prevent a perfect storm in the office industry.
The development of office buildings is similar to the boom and decline in shopping centers. LaSalvia said winners and losers will depend on proximity to mixed-use communities and parks rather than typical office buildings.
“There are bright places, and there are places of extreme darkness,” LaSalvia said. “This is part of a long evolution where we are seeing outdated architecture in outdated neighborhoods.”
Moody's said that other industries, such as multi-family housing, have also shown some positive signs. After six consecutive quarters of growth, excess supply has finally been digested and will peak at the end of 2023. In the retail industry,$Macy's (M.US)$The stores opened by other companies were small, which helped maintain a stable vacancy rate.