Over the past 10 years, the commercial real estate market in Pittsburgh has varied widely. The typical market ebbs and flows, but one atypical factor is to blame for unexpectedly high vacancy rates. Back in 2014, Pittsburgh was at its lowest commercial real estate vacancy rate at 7.9%. Contrasted by the highest vacancy rates to date in Q1 2023, coming in at 21.8%. Between 2014 and now, 2023, Covid-19 took the world by surprise, forever changing the landscape of commercial real estate. So, what is to blame? It is a multi-factor issue. Return to the office, hybrid work, and interest rates all play a part in the changing vacancy rates.
Some organizations are now requiring their employees to return to the office 5 days a week and move away from hybrid work. Goldman Sachs announced just before Labor Day that all employees would need to return to office. Google said they would consider in-person attendance during performance reviews. JP Morgan Chase, which is in the process of constructing a new building in New York City for reportedly $3 Billion, is encouraging their employees to come back to the office. All of these companies are enforcing return to office policies to escape potential vacancies in their office spaces.
As we sit in the second half of 2023, high-interest rates have pushed our economy into a potential recession. Recession scares commercial real estate property owners. Could a full return to office mitigate the possibility of a recession? However, there are hopes that this is just a bump and a recession will not occur.
