Empty Offices, Busy Malls: The Paradox of U.S. Real Estate in 2023

We can blame it on COVID-19, remote work, the inevitable emergence of the hybrid work schedule, or all three, but the national office market continues to grapple with high vacancy rates. And the top-tier markets are seeing the worst of it, recording vacancies in the 20-percent range, quarter after quarter. But the retail sector’s performance is an entirely different story. Retail numbers remain in the single digits across the country and for one leading metropolis, the office vacancy rate is a whopping 8 times higher than the retail vacancy rate. To understand if there is any connection between office vacancy and the retail real estate market (and vice versa) we compared the vacancy rates for the two property types in some major U.S. cities.

The U.S. office market is not yet on the road to recovery. The national office vacancy rate rose quarter-over-quarter to 16.4 percent in the second quarter of 2023, marking a record high for the sector, according to Colliers. Most of the top metropolitan areas are still being hobbled by their beleaguered central business districts, where remote work-induced downsizing, flight-to-quality relocations, and even safety issues in some cases, have turned these once bustling downtown areas into veritable ghost towns. 

METROPOLITAN AREAOFFICE VACANCYRETAIL VACANCYHouston22.1%4.9%Los Angeles21.0%5.3%Chicago20.5%5.1%Boston19.7%2.6%Miami-Dade County10.4%3.1%Source: Colliers, Q2 2023

Houston is among those markets where the office sector is struggling the most. The city recorded an office vacancy rate of 22.1 percent in the second quarter, one of the highest vacancy rates in the country, due in no small part to

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