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Visualizing 1 Billion Square Feet of Empty Office Space

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Visualizing 1 Billion Square Feet of Empty Office Space

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1 Billion Square Feet of Empty Office Space

In April, one of America’s largest office owners, Brookfield, defaulted on a $161 million loan.

The loan, covering 12 office buildings, was mainly concentrated in the Washington, D.C. market. Faced with low occupancy rates, it joined other office giants Blackstone and WeWork defaulting on office debt this year.

The above graphic shows nearly 1 billion square feet of empty office space in the U.S. based on data from JLL—and the wider implications of office towers standing empty.

Ranking U.S. Cities by Empty Office Space

At the end of the first quarter of 2023, a record 963 million square feet of office space was unoccupied in America. An estimated five to 10 office towers are at risk of defaulting each month according to Manus Clancy, senior managing director at Trepp.

Here are cities ranked by their total square feet of office vacancy as of Q1 2023. Figures include central business districts and suburban areas.

Ranking MarketTotal Vacancy (SF)Total Vacancy (%)
1New York75.8M16.1%
2Washington, D.C.74.0M20.8%
3Chicago63.2M23.5%
4Dallas53.5M25.0%
5Houston49.3M25.6%
6Los Angeles47.1M24.1%
7New Jersey43.3M25.8%
8Atlanta38.1M21.6%
9Boston31.8M19.1%
10Philadelphia27.8M18.8%
11Denver27.3M21.6%
12Phoenix25.2M23.9%
13San Francisco22.8M26.4%
14Seattle21.4M17.7%
15Minneapolis19.9M19.7%
16Detroit18.0M19.3%
17Orange County17.7M17.6%
18Salt Lake City13.9M18.5%
19Kansas City13.8M20.8%
20Pittsburgh13.8M21.8%
21Charlotte13.7M20.6%
22Austin13.6M18.9%
23Baltimore13.1M18.2%
24Portland12.8M17.5%
25Silicon Valley12.1M17.3%
26Oakland–East Bay11.7M22.0%
27San Diego10.7M12.3%
28St. Louis10.5M21.9%
29Cincinnati10.1M21.4%
30Sacramento9.9M19.6%
31Fairfield County9.7M25.4%
32Columbus9.7M21.7%
33Milwaukee9.2M24.0%
34Nashville9.0M18.9%
35Raleigh-Durham8.9M15.2%
36Indianapolis8.6M22.4%
37Tampa8.2M17.2%
38Fort Worth7.6M16.7%
39Miami7.6M16.2%
40Cleveland7.3M18.3%
41San Antonio7.2M17.8%
42Long Island6.3M15.2%
43Westchester County5.8M22.1%
44Jacksonville5.4M18.6%
45Orlando5.0M13.3%
46San Francisco Peninsula4.4M13.3%
47Richmond4.3M13.3%
48Fort Lauderdale4.3M16.1%
49North San Francisco Bay4.0M18.3%
50Louisville3.6M16.8%
51Des Moines3.2M12.0%
52Hampton Roads3.1M14.7%
53West Palm Beach2.4M10.3%
54Grand Rapids1.8M13.2%
United States962.5M20.2%

Numbers may not total 100 due to rounding.

New York has roughly 76 million square feet of empty office space. If this were stacked as a single office building, it would stretch 7 miles into the atmosphere. In 2019, the office sector accounted for about a third of all jobs in the city.

Falling closely behind is Washington, D.C. with a 21% vacancy rate—8% higher than what is typically considered healthy. Occupiers are downsizing given remote work trends, yet some office buildings are being converted to residential properties, curtailing vacancy rates.

Across 54 markets in the dataset, San Francisco has the highest vacancy rate at over 26%. Prior to the pandemic, vacancy rates were about 4%. This year, Salesforce walked away from a 30-story tower in downtown San Francisco spanning 104,000 square feet in an effort to cut costs.

Overall, rising interest rates and higher vacancies have hurt U.S. office markets, with many cities potentially seeing an uptick in vacancies going forward.

Empty Office Space: Impact on Banks

Office building valuations are projected to fall 30% in 2023 according to Richard Barkham, global chief economist at CBRE Group.

A sharp decline in property values could potentially result in steep losses for banks. This is especially true for small and regional banks that make up the majority of U.S. office loans. Big banks cover roughly 20% of office and downtown retail totals.

Consider how commercial real estate exposure breaks down by different types of banks:

Bank AssetsCommercial Real Estate Loans
% of Total Assets
Share of Industry Assets
<$100M11.3%0.2%
$100M-$1B26.9%4.7%
$1B-$10B32.5%9.7%
$10B-$250B18.1%30.1%
>$250B5.6%55.5%

Source: FitchRatings

For big banks, a recent stress test by the Federal Reserve shows that a 40% decline in commercial property values could result in a $65 billion loss on their commercial loan portfolios. The good news is that many big banks are sitting on healthy capital reserves based on requirements set in place after the global financial crisis.

Smaller banks are a different story. Many have higher loan concentrations and less oversight on reserve requirements. If these loan portfolios deteriorate, banks may face a downgrade in ratings and higher credit losses.

Additionally, banks with loans in markets with high vacancy rates like San Francisco, Houston, and Washington, D.C. could see more elevated risk.

How High Rates Could Escalate Losses

Adding further strain are the ramifications of higher interest rates.

Higher rates have negatively impacted smaller banks’ balance sheets—meaning they are less likely to issue new loans. This is projected to cause commercial real estate transaction volume to decline 27% in 2023, contributing to lower prices. Banks have already slowed lending for commercial real estate in 2023 due to credit quality concerns.

The good news is that some banks are extending existing loan terms or restructuring debt. In this way, banks are willing to negotiate new loan agreements to prevent widespread foreclosures from hurting their commercial loan portfolios. Short-term extensions on existing loans were often seen during the global financial crisis.

Still, foreclosures could take place if restructuring the loan doesn’t make financial sense.

Overall, only so many banks may be willing to wait out the uncertainty with loan extensions if fundamentals continue to worsen. Offices that are positioned to weather declines will likely have better quality, location, roster of tenants, and financing structures.

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Mapped: The 10 U.S. States With the Lowest Real GDP Growth

In this graphic, we show where real GDP lagged the most across America in 2023 as high interest rates weighed on state economies.

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The Top 10 U.S. States, by Lowest Real GDP Growth

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

While the U.S. economy defied expectations in 2023, posting 2.5% in real GDP growth, several states lagged behind.

Last year, oil-producing states led the pack in terms of real GDP growth across America, while the lowest growth was seen in states that were more sensitive to the impact of high interest rates, particularly due to slowdowns in the manufacturing and finance sectors.

This graphic shows the 10 states with the least robust real GDP growth in 2023, based on data from the Bureau of Economic Analysis.

Weakest State Economies in 2023

Below, we show the states with the slowest economic activity in inflation-adjusted terms, using chained 2017 dollars:

RankStateReal GDP Growth 2023 YoYReal GDP 2023
1Delaware-1.2%$74B
2Wisconsin+0.2%$337B
3New York+0.7%$1.8T
4Missississippi+0.7%$115B
5Georgia+0.8%$661B
6Minnesota+1.2%$384B
7New Hampshire+1.2%$91B
8Ohio+1.2%$698B
9Iowa+1.3%$200B
10Illinois+1.3%$876B
U.S.+2.5%$22.4T

Delaware witnessed the slowest growth in the country, with real GDP growth of -1.2% over the year as a sluggish finance and insurance sector dampened the state’s economy.

Like Delaware, the Midwestern state of Wisconsin also experienced declines across the finance and insurance sector, in addition to steep drops in the agriculture and manufacturing industries.

America’s third-biggest economy, New York, grew just 0.7% in 2023, falling far below the U.S. average. High interest rates took a toll on key sectors, with notable slowdowns in the construction and manufacturing sectors. In addition, falling home prices and a weaker job market contributed to slower economic growth.

Meanwhile, Georgia experienced the fifth-lowest real GDP growth rate. In March 2024, Rivian paused plans to build a $5 billion EV factory in Georgia, which was set to be one of the biggest economic development initiatives in the state in history.

These delays are likely to exacerbate setbacks for the state, however, both Kia and Hyundai have made significant investments in the EV industry, which could help boost Georgia’s manufacturing sector looking ahead.

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