Large cities are dealing with a commercial real estate crisis. Rents are going back up to what they were before the Covid lockdown. And many companies tried to take advantage of discounts on vacant office spaces as we moved on from the pandemic. Now, companies are trying to bail on these leases to save money as we deal with a recession. How will this affect major metropolitan areas that are already expensive to live in?
Why are companies bailing on their commercial real estate?
Many industries, especially tech firms, jumped on discounted commercial real estate over the last couple of years. According to the WSJ, Meta, Lyft, and Salesforce are just a few of the notable companies that are vacating their office buildings and bracing for economic turbulence. Amazon also halted construction on its new office building in July of this year. As these tech firms cut costs and slash payrolls, those in the metropolitan areas are struggling to find employment well enough to pay their rents which are rising just as much as, if not more, than the commercial spaces.
Rents will not go down
One of the reasons metropolitan areas is that they have limited space to build more places to live. New York City is building fewer houses per capita than almost every other city in the country. And as we move into a recession, the housing market continues to get more competitive, forcing more people to rent. If we find an efficient way to transform a large chunk of the vacant commercial real estate in major cities into apartments or rental spaces, we will relieve the low supply renters are dealing with. Of course, that is easier said than done.
We better start building
The global economy is riddled with supply chain issues that make construction slow and expensive. But the major cities in our country will continue to suffer if we don’t find a solution. They can only survive if we make cities more accessible to future generations.