The issue of commercial real estate vacancy rates in major U.S. cities has become one of the significant economic issues attracting attention in recent years.

Especially after the pandemic, the spread of remote work and online shopping has caused many difficulties in the commercial real estate market. The vacancy rate issue in urban areas is placing economic burdens on property owners, landlords, and investors, and the scale and impact are growing for various reasons.

• The COVID-19 pandemic has severely impacted the commercial real estate market. In particular, as remote work became commonplace in office properties, many companies have reduced or completely withdrawn their office spaces.
• With the spread of hybrid work models, the proportion of employees working from home has increased, leading to a rise in office vacancy rates. Some companies are also showing a trend of moving to smaller offices or preferring shared office spaces.

Increase in Commercial Real Estate Vacancy Rates

• Commercial real estate vacancy rates have sharply risen, especially in major cities. Vacancy rates for office and retail properties have increased in cities like New York, Chicago, San Francisco, and Los Angeles.
• Office vacancy rates have steadily risen since the COVID pandemic, particularly in urban areas where the demand for commercial real estate has sharply decreased. Properties near downtown are still seeing an increase in vacancies as many companies prefer remote work.

Retail Vacancy Rate Issues

• Retail properties have been significantly affected by the rapid growth of online shopping and changes in consumer behavior. In particular, large commercial facilities like shopping malls have seen an increase in retailer exits, leading to a surge in vacancy rates.
• Due to the influence of online shopping platforms like Amazon, many consumers now prefer online shopping over physical stores, resulting in decreased revenues and increased vacancy rates for offline shops.

Potential for Recovery in Commercial Real Estate

• Some commercial real estate markets have shown signs of recovery. Companies adopting hybrid work models have somewhat restored demand by utilizing small offices or shared office spaces, and the real estate markets in some major cities are gradually stabilizing.
• Additionally, the growth of e-commerce has led to an increasing demand for industrial properties such as warehouses and distribution centers.