(NewsNation) — American office buildings are the emptiest they’ve been in decades, but some cities are starting to see workers return.
Nationwide, office visits in February were down 30% from pre-pandemic levels, according to foot traffic data from Placer.ai, but cities like Miami and New York fared much better. Both are approaching their pre-pandemic office foot traffic levels while other metros like Chicago and San Francisco continue to lag.
With elevated interest rates and remote work, empty offices have become a growing concern as banks face a looming “maturity wall” that could trigger economic consequences. Experts have warned hollowed-out business districts may accelerate an “urban doom loom,” wherein struggling downtowns negatively impact entire cities.
Weakness in the commercial real estate sector could have serious implications for local tax revenue and also pension plans, which have become increasingly tilted toward alternative investments like real estate in recent years.
In other words, even if you don’t work in a downtown office, empty buildings could impact the property taxes that help fund schools, roads and other public services.
Here’s how four major cities compare.
Office vacancy rates are based on Cushman & Wakefield’s quarterly reports. Transit ridership numbers are based on estimates from the American Public Transportation Association.
Chicago
Office vacancy 2023 (Q4): 23.5% in the central business district
Office vacancy 2019 (Q4): 14.1% in the central business district
Office foot traffic: -38% from Feb. 2020
Office visits in the Windy City sat near the middle of the pack last month, outperforming places like Houston and Los Angeles relative to Feb. 2020 but underperforming compared to New York City, Miami, and Dallas, according to Placer.ai.
Several companies including Citadel and Boeing announced plans to leave the nation’s third-largest city in 2022. Boeing’s CEO pointed to unused office space as one of the key drivers of the decision while Citadel cited concerns about local crime.
Winter weather may also help explain the reduced foot traffic. In January the city saw severe cold and office visits were 50% lower than in Jan. 2020. Whereas, last July office visits were 38% off pre-pandemic levels.
Transit Demand (Weekly Ridership)
- Chicago Transit Authority: -27% from pre-pandemic
Signs of life:
Office foot traffic: +19.5% compared to Feb. 2023
Over the past year, the growth in Chicago office visits has outpaced the national average (18.6%).
Some parts of the urban core are faring better than others. Thanks to initiatives by major companies like Google and McDonald’s, the vacancy rate in the city’s Fulton Market area has decreased for eight consecutive quarters, according to real estate firm Colliers.
In December, Google also unveiled plans to renovate the Thompson Center — a 17-story landmark in the heart of the city. The tech giant intends to open offices there in 2026.
New York City
Office vacancy 2023 (Q4): 22.8% in Manhattan
Office vacancy 2019 (Q4): 11.1% in Manhattan
Office foot traffic: -14.5% compared to Feb. 2020
When COVID-19 arrived in the Spring of 2020, the densely packed city quickly became the epicenter of the crisis. Once crowded office buildings sat empty and the food vendors outside them went from selling 400 hot dogs a day to less than 10.
Since then, New York’s comeback is second only to Miami in terms of office foot traffic. Last month, office visits were 14.5% lower than pre-pandemic levels, per Placer.ai.
Transit Demand (Weekly Ridership)
- MTA New York City Transit: -12% from pre-pandemic
Signs of life:
Office foot traffic: +22% compared to Feb. 2023
The city’s financial industry is part of the reason for its emergence as a return-to-office leader, Placer.ai said in its report. Employers like Goldman Sachs and Morgan Stanley have called workers back into the office.
Demand for new office space has shot up nearly 40% from a year ago, according to real estate analytics company VTS.
San Francisco
Office vacancy 2023 (Q4): 31.5% in the central business district
Office vacancy 2019 (Q4): 5.8% in the central business district
Office foot traffic: -46% from Feb. 2020
The New York Times called it “the most empty downtown in America” in 2022 and today San Francisco’s office recovery continues to lag behind other metros. Much of that is due to the region’s tech sector, whose employees were more likely to go — and stay — remote.
As work norms shifted, many left for more affordable cities during the pandemic and still haven’t returned. The mass exodus uncovered longstanding problems with homelessness, drugs and property crime which have plagued the city in recent years.
Transit Demand (Weekly Ridership)
- San Francisco Municipal Railway: -29% from pre-pandemic
- San Francisco Bay Area Rapid Transit: -61% from pre-pandemic
Signs of life:
Office foot traffic: +24% compared to Feb. 2023
While it still trails other major cities, the nation’s tech capital has seen office visits jump by almost a quarter over the past year — an indication that “San Francisco’s office recovery is still unfolding,” Placer.ai noted.
Part of the resurgence can be attributed to the artificial intelligence boom, which has founders and investors returning to Silicon Valley where top talent is abundant.
Crime is also trending in the right direction. Last month, property crime fell 29% compared to the year prior and violent crime was down 17%, according to the city.
Miami
Office vacancy 2023 (Q4): 12.8% in the central business district
Office vacancy 2019 (Q4): 17.3% in the central business district
Office foot traffic: -9.4% compared to Feb. 2020
Miami has led the way in office recovery and its central business district now has a lower vacancy rate than before the pandemic, Cushman & Wakefield data shows. Last month, office foot traffic was off pre-pandemic levels by just 9%.
The area has seen a steady influx of tech companies in recent years as it’s worked to transform itself into a world-class business hub. Drawn by a more favorable tax structure and looser COVID restrictions, Miami caught a wave of high earners leaving places like San Francisco and Chicago.
Transit Demand (Weekly Ridership)
- Miami-Dade Transit Agency: -4% from pre-pandemic
Signs of life:
Office foot traffic: +23% compared to Feb. 2023
The question now is whether Miami’s pandemic gold rush will continue. The average asking rent for office space grew by nearly 50% from $45.67 per square foot in 2019 to $66.80 at the end of 2023.
A new Wall Street Journal report Monday suggested Miami’s exceptionalism “appears to be fading,” noting that leasing activity was down 25% last year from 2022. Office construction starts have also slowed down from a recent peak in the second quarter of 2023, the report noted.
