How US cities are reimagining the upcoming as office vacancy rates soar to 30-year high

Throughout the country, once bustling business districts have turned into ghost towns. The pandemic has shown that many jobs can be done remotely. Now some major U.S. cities are breathing recent life into vacant office buildings by converting them into housing. Notable cities that are part of this pattern include recent York, Austin, Cleveland, San Francisco, and Boston.

The office vacancy rate is 20.1% in the U.S., according to Moody’s. That’s a 30-year high, with more than 900 million square feet of office space vacant — enough to fill recent York City’s One globe Trade Center 300 times.

Amazon, Citigroup, Walmart, and UPS are among the major companies now requiring employees to spend more period in the office. Some companies are pulling out all the stops to entice workers back. Amenities may include massage rooms, health worry services, and on-site personal gyms.

However, most experts consent that hybrid and remote work is here to remain. “Companies don’t require office space in the way that they needed office space 10 years ago, 20 years ago, 50 years ago,” Evan Horowitz, executive director of The Center for State Policy Analysis at Tufts University, said. “Remote work has just transformed that landscape.”

Major cities across the country, including Boston, Austin, and Chicago, are seeing office vacancies at or near record highs. In San Francisco, more than 22% of offices are currently vacant, a significant boost from about 9% in 2019.

Some cities are now at uncertainty of falling into what is known as the “economic doom loop.” High vacancy rates can factor property values to plummet, decreasing levy turnover. This reduce in turnover affects financing for essential services such as schools, police and sanitation, ultimately making these cities less desirable places to live.

Horowitz says Boston is more vulnerable to falling into an “economic doom loop” than other major cities because of its distinctive s levy structure.

“Boston is closer to crisis mode than other cities because it is so dependent on taxes from commercial real estate, twice as dependent as virtually any other city in the country,” Horowitz said. The setback of commercial tenants is having a ripple result on area businesses.

When Dave Savoie bought his favorite bar and grill, Silvertone, in 2016 he said it was like a aspiration arrive factual.

The downtown Boston establishment was popular with the business throng. Office workers made up 50% of Savoie’s customers, but all that changed with the COVID-19 pandemic.

“I used to call them suits,” Savoie said. “You recognize, the office guys, the finance guys. And this was their place. [Now] they work from home. If people arrive to the city now, they work a maximum three days a week.”

It proved too much for Silvertone and, after 27 years, eight of them under Savoie’s ownership, the bar announced “last call” in May.

Boston’s Mayor Michelle Wu, who is up for reelection next year, is taking steps to address the circumstance. She is implementing levy breaks and zoning changes to transform unwanted office space into much-needed housing.

“We have about 500 housing units that are now in the pipeline to be converted out of formerly vacant office buildings,” Wu told ABC information. “We’re taking city buildings like libraries that require renovations and adding housing on top of that and making it faster than ever before through zoning and other city regulatory processes to get your building built and to get those shovels in the ground. The more that downtown is a residential, thriving, busy neighborhood, just like every other one of our neighborhoods, the more everyone benefits.”

The concept is that business districts will be reimagined as vibrant 24/7 neighborhoods that seamlessly blend work, living, dining and entertainment. This holistic way aims to make a dynamic throng where daily life and work coexist, fostering a wealthy, interconnected lifestyle.

“There are lots of ways to construct a vibrant downtown that doesn’t involve the central role of office buildings,” Horowitz said. “It could be apartments, it could be lab space. There are lots of other things you can do with land that makes people desire to leave downtown and enjoy themselves.”

Many cities are already converting office space into housing, with Cleveland leading the way — 11% of its office inventory is currently undergoing this transformation. Similar projects are also taking place in Cincinnati, Houston, and recent York, where the iconic Flatiron office building is set to be transformed into luxury condominiums. “This is a test that’s affecting every city in America,” Wu said. “And in Boston, we’re showing that it’s also an chance.”

That “chance” is something David Greaney is seizing on. At a period when many real estate investors are looking to sell their office buildings, Greaney and his firm Synergy are buying them up, at a deep discount. Synergy currently owns 35 properties in the Greater Boston area – four of them were bought in just the history 12 months.

Greaney says the worst is over in terms of office vacancies, and he is positive about the upcoming of cities. “The great thing about cities is that cities evolve, and I certainly ponder that our cities will evolve,” Greaney said. “You may view more residential uses, more hospitality or institutional uses, but the office component of downtowns, I depend, will continue to be a very large factor.”

Working out of one of the same buildings Greaney recently bought, tiny business owners and brothers Michael and Emilio Ruggeri are betting on a comeback for Boston’s downtown.

For three decades they have been serving breakfast and lunch to the office throng at their Archie’s NY Deli. Office workers accounted for nearly 80% of their business pre-pandemic, but that number has since dwindled to about 50%.

“We’ve been doing more deliveries,” said Emilio Ruggeri. “The construction guys have actually kept us going.”

They’ve also reduced their staff, trimmed their menu and shortened their hours to make ends meet, confident that things will turn around.

“I’m an eternal optimist,” said Michael Ruggeri. “The buildings are way too expensive to just remain vacant. Someone’s going to receive over the space, so we’re optimistic.”