Office space vacancy is at its highest since 1979, and analysts predict that nearly one-quarter of U.S. offices will be vacant by early 2026. For our new report, Switch On Business has calculated that $7.61 billion in annual rent is lost in New York City alone, while in terms of square footage, Chicago has the second most vacant space — around 58.1 million square feet.
Around 28.6 million, or 20% of U.S. workers aged 18-24, now work on a hybrid or fully remote basis, and occupancy rates in U.S. cities are now only half what they were pre-pandemic. But the WFH revolution has only aggravated the issue of excess office space, which has threatened to reemerge after decades of over-building led to previous peaks in vacancies in the late ‘70s and ‘80s.
City officials are pushing for the conversion of some of these spaces to help counter the housing crisis. But converting modern office buildings into homes is difficult, partly for one of the reasons a return to the office is unappealing: these buildings exist on an inhuman scale, with much of the space starved of natural daylight.
Meanwhile, up to $250 billion may be lost due to plummeting commercial property values, which have knock-on effects on the broader economy. And declining property tax hauls and abandoned neighborhoods add to the sense of an “urban doom loop” that impacts local quality of life, business opportunities and growth outlook.
We compared the total office space inventory with the vacancy rates across the U.S. to calculate the total square footage of empty office space. Then, we multiplied the empty office space figures by the rental cost (annual price in USD per square foot) to calculate the lost value in each city. Read on to find out which cities in America cost landlords the most in vacant office space.
Quick Stats
- New York City has the highest value of vacant office space in the U.S., equating to $7,610,663,156 ($7.61 billion) in lost rent per year.
- The second highest value of vacant office space is in Los Angeles — $2.10 billion per year.
- New York City also has the most vacant square footage: 105.8 million sq. ft.
- Chicago is the city with the second most vacant space: 58.1 million sq. ft.
$7.61 Billion in Annual Rent From Vacant Offices Is Lost in New York City Alone
New York City has the most vacant office space in America, both by value (below) and floorspace (see second image, below). Unrented offices in New York account for $7,610,663,156 ($7.61 billion) in lost revenue annually. Office use in New York suffered similar declines in 2001 and 2008, but those were linked to events (the September 11 attacks and the financial crisis) rather than a permanent cultural shift.
“What happens to New York City from here on out depends on the actions we take and the policy decisions that are made,” says Dr. Stijn Van Nieuwerburgh, the Columbia Business School Professor of Real Estate who coined the phrase “urban doom loop.” “In a best-case scenario, we remove 30 or 40 percent of the office stock in New York City, turn it into wonderful housing. New York City has all these great amenities, it’s a wonderful place where young people want to live, regardless of where they work.”
There are three Californian cities among the five U.S. markets with the most lost value in vacant office space: Los Angeles ($2.10 bn), San Francisco ($2.01 bn) and San Jose ($2.00 bn). But even added together, the three fail to match the enormity of New York’s shortfall.
L.A. and San Jose are also in the top ten when measured by floor space — still falling short, when combined, of New York’s 105.8 million sq. ft. of empty offices. You could fit 2.9 Central Parks on the vacant office space in New York, as our second visualization illustrates.
New York has 1.8 times the free floorspace of second-placed Chicago (58.1 million sq. ft.). The birthplace of the skyscraper, Chicago has witnessed some building prices plummet to less than a quarter of their previous valuations. The city is likely to undergo radical change following a $1 billion scheme encouraging developers to revamp abandoned offices as residential and resale spaces, with an emphasis on local businesses and affordable housing.
Los Angeles is the Western City with the Most Lost Value in Empty Offices
Californian cities account for eight of the twenty Western state real estate markets with the most lost value through vacant offices. Los Angeles is worst hit, with $2.10 billion in lost rentals across 51.1 million square feet of empty space. A study from Rand Corp. suggested that around 2,300 commercial properties could be converted to provide between 72,000 and 113,000 L.A. homes. “Our downtowns still are built for a time and a way of work that’s not coming back anytime soon,” says State Assembly Member Matt Haney.
Chicago Has By Far Most Lost Value Among Midwestern States
With 58.1 million sq. ft. of vacant space worth $2.05 billion annually, vacant offices in Chicago are worth more than the next six Midwestern cities altogether (see The American Cities with the Most Empty Office Space, above).
The Twin Cities of Minneapolis—Saint Paul ($621.77 million) have the second-most lost value in this region. In St. Paul, as elsewhere, subletting has become common as companies reduce the costs of easing out of a contract while others adapt to a slow return to the workplace. Meanwhile, other buildings will become homes — boosting both housing and employment levels: “Seventy-five percent of the cost of a conversion goes to labor and only 25 percent material, whereas on new construction, it’s about the opposite,” says local developer Chris Sherman. “So for both sustainability and job creation, conversions are highly impactful.”
In the Southwest, Dallas and Houston Down $3 Billion on Vacant Offices
In Southwestern states, the Texas cities of Dallas ($1.62 billion) and Houston ($1.56 billion) have the most lost value in vacant office space. The region was a hotspot for over-building during the oil boom of the 1970s, and twentieth-century buildings have fallen vacant at a much higher rate than those built over recent years. In some cases, this is because employers such as NRG Energy wish to lure workers back to the premises with the offer of state-of-the-art surroundings and luxuries such as an on-site gym.
Lost Value of Empty Offices in Southeastern States Centered on Atlanta
Atlanta, Georgia ($1.24 billion), has significantly more lost value in empty offices than the rest of the Southeast. According to data from CBRE, a real estate services firm almost one third (32.4%) of all office space in Atlanta is empty. This is the 9th consecutive quarter that availability has risen in Atlanta. The research suggests that the continued emptying of offices in the city is due to large corporations shutting down satellite offices to save money; “Overall, the stubbornly high availability rate in Atlanta continues to be the result of corporate tenants with substantial footprints offloading
unneeded space amidst economic distress.”
Boston and New Jersey Among Biggest Office Space Losers in The Northeast
New York City ($7.61 billion) is taking the biggest financial hit in the Northeast and the entire U.S. (see The American Cities with the Most Empty Office Space, above). But Boston ($1.43 bn) and New Jersey ($1.37 bn) are also in the ten-figure club. The Boston Policy Institute calculates that the city may lose $1.4 billion in taxes over five years — with Boston “uniquely dependent on this revenue source and therefore uniquely vulnerable to the price declines in the commercial sector,” according to Evan Horowitz of Tuft’s Center for State Policy Analysis. Mayor Michelle Wu has established a 75% discount on the residential tax bill for converted buildings to help stimulate redevelopment projects — economists see Boston as one of several U.S. cities where this is most feasible, due to the high price of home rentals.
Back to Work
When even the chief people officer at Zoom is excited about IRL office space, perhaps there is hope that office vacancies have already peaked. “What we’ve found is, people have enjoyed coming back to the office,” Zoom’s Matthew Saxon told NPR. “There is a buzz. There’s something about being able to go have lunch with your teammates.”
But even the best scenarios require imagination and investment. Years after lockdown, firms are still figuring out how to balance remote work with the advantages of office space — those that thrive may benefit from being bold and nimble.
Methodology
We first multiplied the total office space inventory by the vacancy rates (as per figures listed in Cushman & Wakefield MarkBeat U.S. National Quarterly Q1 2024 Reports) in order to calculate the total square footage of empty office space. We then multiplied the empty office space figures by the asking rents (annual price in USD per square foot) to calculate the lost value in each market. This data is correct as of July 2024.
Dennis Duffy says
Thanks for sending this analysis. That said, the value losses here are strictly cash flow (1 year only) based. While these are material numbers, they do NOT reflect potential capital value losses. More specifically, capital values are driven by long-term leases (and projected revenues) and then capitalized. These capitalized value losses are what cause major problems w/loan to value ratios, capital calls (for equity partners), bankruptcies, etc. Further downstream are tax revenues to the various jurisdictions, and various industry groups (contractors; brokers; etc.). IMO, this should have been noted in the research.
Dennis Duffy, MAI
Tom G says
This is thought provoking, but the comparisons are entirely skewed by amount of CRE in each city to begin with. Would be very interesting to see some kind of normalized rate across cities, such as vacancy per total CRE square footage.