Markets
Visualizing 1 Billion Square Feet of Empty Office Space
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 | Market | Total Vacancy (SF) | Total Vacancy (%) |
---|---|---|---|
1 | New York | 75.8M | 16.1% |
2 | Washington, D.C. | 74.0M | 20.8% |
3 | Chicago | 63.2M | 23.5% |
4 | Dallas | 53.5M | 25.0% |
5 | Houston | 49.3M | 25.6% |
6 | Los Angeles | 47.1M | 24.1% |
7 | New Jersey | 43.3M | 25.8% |
8 | Atlanta | 38.1M | 21.6% |
9 | Boston | 31.8M | 19.1% |
10 | Philadelphia | 27.8M | 18.8% |
11 | Denver | 27.3M | 21.6% |
12 | Phoenix | 25.2M | 23.9% |
13 | San Francisco | 22.8M | 26.4% |
14 | Seattle | 21.4M | 17.7% |
15 | Minneapolis | 19.9M | 19.7% |
16 | Detroit | 18.0M | 19.3% |
17 | Orange County | 17.7M | 17.6% |
18 | Salt Lake City | 13.9M | 18.5% |
19 | Kansas City | 13.8M | 20.8% |
20 | Pittsburgh | 13.8M | 21.8% |
21 | Charlotte | 13.7M | 20.6% |
22 | Austin | 13.6M | 18.9% |
23 | Baltimore | 13.1M | 18.2% |
24 | Portland | 12.8M | 17.5% |
25 | Silicon Valley | 12.1M | 17.3% |
26 | Oakland–East Bay | 11.7M | 22.0% |
27 | San Diego | 10.7M | 12.3% |
28 | St. Louis | 10.5M | 21.9% |
29 | Cincinnati | 10.1M | 21.4% |
30 | Sacramento | 9.9M | 19.6% |
31 | Fairfield County | 9.7M | 25.4% |
32 | Columbus | 9.7M | 21.7% |
33 | Milwaukee | 9.2M | 24.0% |
34 | Nashville | 9.0M | 18.9% |
35 | Raleigh-Durham | 8.9M | 15.2% |
36 | Indianapolis | 8.6M | 22.4% |
37 | Tampa | 8.2M | 17.2% |
38 | Fort Worth | 7.6M | 16.7% |
39 | Miami | 7.6M | 16.2% |
40 | Cleveland | 7.3M | 18.3% |
41 | San Antonio | 7.2M | 17.8% |
42 | Long Island | 6.3M | 15.2% |
43 | Westchester County | 5.8M | 22.1% |
44 | Jacksonville | 5.4M | 18.6% |
45 | Orlando | 5.0M | 13.3% |
46 | San Francisco Peninsula | 4.4M | 13.3% |
47 | Richmond | 4.3M | 13.3% |
48 | Fort Lauderdale | 4.3M | 16.1% |
49 | North San Francisco Bay | 4.0M | 18.3% |
50 | Louisville | 3.6M | 16.8% |
51 | Des Moines | 3.2M | 12.0% |
52 | Hampton Roads | 3.1M | 14.7% |
53 | West Palm Beach | 2.4M | 10.3% |
54 | Grand Rapids | 1.8M | 13.2% |
United States | 962.5M | 20.2% |
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 Assets | Commercial Real Estate Loans % of Total Assets | Share of Industry Assets |
---|---|---|
<$100M | 11.3% | 0.2% |
$100M-$1B | 26.9% | 4.7% |
$1B-$10B | 32.5% | 9.7% |
$10B-$250B | 18.1% | 30.1% |
>$250B | 5.6% | 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.
Markets
Ranked: The World’s 50 Largest Private Equity Firms
In this graphic, we show the largest private equity firms in the world—from titan Blackstone to China’s leading alternative funds.
The World’s 50 Largest Private Equity Firms
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.
In 2023, private equity firms controlled $8.2 trillion in assets globally according to McKinsey & Company, a figure that has rapidly expanded since the industry first emerged 40 years ago.
As large investors such as pension funds and insurance companies increasingly look to private markets, these alternative asset managers have seen their assets grow by more than twofold in the last five years.
This graphic shows the top 50 private equity firms worldwide, based on data from Private Equity International (PEI).
The Top 50 Private Equity Firms
To determine the rankings, private equity firms were defined as those that raise capital with the purpose of directly investing in businesses, covering diversified private equity, venture capital, growth equity, buyouts, along with turnaround or control-oriented distressed investment capital.
The ranking does not include funds of funds, private investment in public equity (PIPE), or funds that follow a secondaries, real estate, infrastructure, hedge fund, debt or mezzanine strategies.
Below, we show the 50 biggest private equity companies around the world, measured by the scale of capital raised over the five-year period ending March 31, 2023:
Ranking | Fund Manager | City | Capital Raised |
---|---|---|---|
1 | Blackstone | New York | $125.6B |
2 | KKR | New York | $103.7B |
3 | EQT | Stockholm | $101.7B |
4 | Thoma Bravo | Chicago | $74.1B |
5 | The Carlyle Group | Washington DC | $69.7B |
6 | TPG | Fort Worth | $55.0B |
7 | Advent International | Boston | $52.9B |
8 | Hg | London | $51.0B |
9 | General Atlantic | New York | $48.7B |
10 | Warburg Pincus | New York | $48.5B |
11 | Silver Lake | Menlo Park | $48.3B |
12 | Goldman Sachs | New York | $45.4B |
13 | Bain Capital | Boston | $44.3B |
14 | Clearlake Capital Group | Santa Monica | $44.0B |
15 | CVC Capital Partners | Luxembourg | $41.8B |
16 | Vista Equity Partners | Austin | $41.5B |
17 | Clayton, Dubilier & Rice | New York | $41.1B |
18 | Hellman & Friedman | San Francisco | $40.9B |
19 | Insight Partners | New York | $40.2B |
20 | Leonard Green & Partners | Los Angeles | $39.6B |
21 | Permira Advisers | London | $34.8B |
22 | Cinven | London | $32.7B |
23 | Brookfield Asset Management | Toronto | $31.2B |
24 | Nordic Capital | Saint Helier | $31.1B |
25 | Genstar Capital | San Francisco | $29.9B |
26 | Francisco Partners | San Francisco | $28.3B |
27 | Tiger Global Management | New York | $28.3B |
28 | Blue Owl Capital | New York | $27.2B |
29 | Partners Group | Zug | $26.7B |
30 | Ares Management | Los Angeles | $26.6B |
31 | Hillhouse Capital Group | Hong Kong | $26.4B |
32 | L Catterton | Greenwich | $24.1B |
33 | Neuberger Berman Private Markets | New York | $23.7B |
34 | PAI Partners | Paris | $23.7B |
35 | TA Associates | Boston | $23.5B |
36 | Apollo Global Management | New York | $22.8B |
37 | Stone Point Capital | Greenwich | $22.3B |
38 | BC Partners | London | $20.3B |
39 | Adams Street Partners | Chicago | $20.2B |
40 | BlackRock | New York | $19.9B |
41 | BDT & MSD Partners | Chicago | $19.5B |
42 | Veritas Capital | New York | $19.0B |
43 | Bridgepoint | London | $18.0B |
44 | Ardian | Paris | $17.9B |
45 | HarbourVest Partners | Boston | $17.5B |
46 | China Reform Fund Management Corporation | Beijing | $16.8B |
47 | Andreessen Horowitz | Menlo Park | $16.7B |
48 | Thomas H. Lee Partners | Boston | $16.0B |
49 | Summit Partners | Boston | $16.0B |
50 | PSG Equity | Boston | $15.8B |
Private equity titan Blackstone is the top in the United States and the world, raising $125.6 billion in capital from 2018 to 2023.
Headquartered in New York, Blackstone’s total assets under management stood at $991 billion as of the first quarter of 2023, and have since surpassed $1 trillion this year. For perspective, this is comparable to the GDP of the Netherlands.
Following next in line are KKR and Sweden’s EQT, each raising over $100 billion. In fact, this was the first time three firms achieved this $100 billion equity-raise milestone in PEI’s ranking over a five-year period. This was particularly notable given a challenging fundraising landscape amid higher borrowing costs and lagging dealmaking activity.
North American Firms Dominate Private Equity
As we can see, the vast majority of the biggest private equity firms are based in America, accounting for 36 of the top 50 firms globally. North American PE firms made up $1.34 trillion (72%) of the $1.85 trillion raised by the top 50 firms in the ranking.
Falling in second by a wide margin is Europe, with nine firms making up $179 billion (9.7%) of the total funds raised. Many of Europe’s largest private equity firms are based in London, England, with the most prominent asset managers in the city being Hg and Permira Advisors.
Across Asia, the top alternative investment firm was Hong Kong-based Hillhouse Capital Group, which launched in 2005. The firm has backed several internet companies spanning from Tencent, the largest publicly-traded company in China, to Baidu, but has faced increasing setbacks amid regulatory crackdowns and a sluggish Chinese stock market.
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