America’s offices are emptier than at any point in at least four decades, reflecting years of overbuilding and shifting work habits that were accelerated by the pandemic, the Wall Street Journal reported. A staggering 19.6% of office space in major U.S. cities wasn’t leased as of the fourth quarter, according to Moody’s Analytics, up from 18.8% a year earlier. That is slightly above the previous records of 19.3% set in 1986 and 1991 and the highest number since at least 1979, which is as far back as Moody’s data go. The new record shows how remote work has upended the office market. But that is only part of the story. Much of the market’s current malaise traces its roots to the office-market downturn of the ’80s and ’90s. That surge in office vacancies in the 1980s and early 1990s followed years of overbuilding. Easy lending fueled a construction boom, particularly in the South where land was cheap and red tape sparse. Banks often financed speculative office projects that didn’t have any tenants signed up. “The building I built was almost a million square feet—100% empty,” said developer Bruce Eichner, who built the Manhattan office tower 1540 Broadway in the 1980s. The result was a glut of office buildings that couldn’t find tenants when the economy went into recession in 1990 as the country suffered from the savings-and-loan crisis, when many S&Ls failed. That glut weighs on the office market to this day and helps explain why vacancies are far higher in the U.S. than in Europe or Asia. Many office parks built in the 1980s and earlier struggle to find tenants as companies cut back on space or leave for more modern buildings.
