Understanding Urban Office Space Trends

The office market isn’t dead. But it’s not coming back the way most people think. What’s really happening? A massive flight to quality. Companies still want office space, but they want the best of the best. Let’s look at the data. 1. Leasing activity is surging in top-tier buildings. ↳San Francisco (+50%), Manhattan (+18%), Dallas (+11%). 2. Sublease supply is shrinking. (-3.8%) ↳A sign that companies are locking in premium spaces, not abandoning them. 3. Vacancy rates are breaking records in Class B and C properties. ↳While Class A towers remain fully leased. What does this tell us? Hybrid work is here to stay. But employees will only come in for: ✔️ Cutting-edge infrastructure (tech-enabled, sustainable, and flexible) ✔️ High-end amenities (think rooftop lounges, fitness centers, concierge services) ✔️ Collaboration-first layouts (goodbye, cubicles, hello, experience-driven workspaces) And the biggest losers in this shift? ❌ Investors betting on "business as usual" instead of adapting. ❌ Landlords clinging to outdated assets who can’t afford renovations. ❌ Companies stuck in second-rate spaces while competitors attract top talent. So, if you own or invest in office space, the message is clear. Premium is the only path forward. If you’re holding outdated assets, you’re already behind. If you’re investing in trophy buildings, you’re ahead of the curve. Because the office market isn’t dying. It’s evolving. Winners will double down on quality, experience, and innovation. Everyone else? They’ll be left behind.

🤖 𝐀𝐈 𝐢𝐬 𝐄𝐱𝐩𝐚𝐧𝐝𝐢𝐧𝐠—𝐁𝐮𝐭 𝐎𝐟𝐟𝐢𝐜𝐞 𝐒𝐩𝐚𝐜𝐞 𝐍𝐞𝐞𝐝𝐬 𝐀𝐫𝐞 𝐒𝐡𝐫𝐢𝐧𝐤𝐢𝐧𝐠 The AI boom is revolutionizing workflows—and eliminating entire job categories. With fewer junior roles, companies need fewer desks, smaller teams, and significantly less office space. If you wait to adjust your footprint, you risk overpaying for space you no longer need. 🏢 𝐄𝐧𝐭𝐫𝐲-𝐥𝐞𝐯𝐞𝐥 𝐫𝐨𝐥𝐞𝐬 𝐚𝐫𝐞 𝐝𝐢𝐬𝐚𝐩𝐩𝐞𝐚𝐫𝐢𝐧𝐠—𝐚𝐧𝐝 𝐬𝐦𝐚𝐫𝐭 𝐭𝐞𝐧𝐚𝐧𝐭𝐬 𝐚𝐫𝐞 𝐚𝐥𝐫𝐞𝐚𝐝𝐲 𝐬𝐡𝐢𝐟𝐭𝐢𝐧𝐠 𝐬𝐭𝐫𝐚𝐭𝐞𝐠𝐲. Here’s what corporate occupiers need to act on: 🔹 𝐉𝐮𝐧𝐢𝐨𝐫 𝐫𝐨𝐥𝐞𝐬 𝐚𝐫𝐞 𝐯𝐚𝐧𝐢𝐬𝐡𝐢𝐧𝐠: AI is replacing support positions like admins, analysts, and coordinators—shrinking the need for large office footprints. Entire departments are being automated, reducing headcount and spatial requirements. 🔹 𝐂𝐥𝐚𝐬𝐬 𝐁 & 𝐂 𝐛𝐮𝐢𝐥𝐝𝐢𝐧𝐠𝐬 𝐚𝐫𝐞 𝐥𝐨𝐬𝐢𝐧𝐠 𝐫𝐞𝐥𝐞𝐯𝐚𝐧𝐜𝐞: Companies are consolidating into Class A properties that offer amenities, tech infrastructure, and flexibility. Legacy buildings are struggling to attract tenants and may soon become obsolete. 🔹 𝐋𝐚𝐧𝐝𝐥𝐨𝐫𝐝𝐬 𝐚𝐫𝐞 𝐟𝐞𝐞𝐥𝐢𝐧𝐠 𝐭𝐡𝐞 𝐩𝐫𝐞𝐬𝐬𝐮𝐫𝐞: High vacancy rates are forcing landlords to offer better deals, early termination options, and generous concessions. Tenants have unprecedented leverage—but it won’t last forever. 🔹 𝐅𝐥𝐞𝐱𝐢𝐛𝐢𝐥𝐢𝐭𝐲 𝐢𝐬 𝐞𝐬𝐬𝐞𝐧𝐭𝐢𝐚𝐥: In a fast-changing workforce, locking into rigid long-term leases is a liability. Flexible leasing models let companies scale up or down based on real-time needs. 🔹 𝐓𝐡𝐞 𝐨𝐥𝐝 𝐥𝐨𝐠𝐢𝐜 𝐝𝐨𝐞𝐬𝐧’𝐭 𝐚𝐩𝐩𝐥𝐲 𝐚𝐧𝐲𝐦𝐨𝐫𝐞: Planning for intern overflow or buffer space is no longer financially justifiable. Every square foot must contribute to productivity, or it gets cut from the plan. The office isn’t obsolete—but the way we use it has changed for good. #𝐂𝐨𝐫𝐩𝐨𝐫𝐚𝐭𝐞𝐑𝐞𝐚𝐥𝐄𝐬𝐭𝐚𝐭𝐞 #𝐎𝐟𝐟𝐢𝐜𝐞𝐒𝐩𝐚𝐜𝐞 #𝐀𝐈 #𝐂𝐑𝐄 #𝐋𝐞𝐚𝐬𝐞𝐍𝐞𝐠𝐨𝐭𝐢𝐚𝐭𝐢𝐨𝐧

Record High Vacancy Rates: Office vacancy rates reached 20.4% in the top 50 U.S. metro areas in 2024, despite increased return-to-office efforts. Persistent Hybrid/Remote Work: Continued adoption of hybrid and remote work models has decreased employers' office space needs. Potential Solutions: Residential Conversions: Transforming office spaces into residential properties, though complex to implement. Demolitions: Removing outdated office buildings, particularly those designed for traditional cubicle setups. Demand for Modern Offices: Newly built offices near transport hubs, with amenities like coworking spaces and fitness centers, are in high demand. Challenges with RTO: Companies like AT&T and Amazon face logistical challenges, such as insufficient desks and parking, with mandatory in-office policies. Future Trends: Construction activity remains low, and office vacancy rates are expected to peak within the next 9–15 months.

A new report from the CBRE commercial real estate group projects that the amount of office space that will be demolished or converted in the United States will exceed new supply deliveries in 2025. As a result, the total amount of office space will decline nationwide for the first time in a quarter century. Only about 13 million square feet of new office space will come online this year, compared to about 25 million square feet last year and over 55 million in the pre-pandemic year of 2019. Meanwhile, 12.8 million square feet is on track for conversion to other uses and 10.5 million square feet will be demolished this year. The vast majority of office conversions – about 75% – are for multi-family residential. New York and Washington, D.C. are the top markets for office conversions. Link to report: https://bit.ly/3TJLNZg