WTF are shadow vacancies?

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This article as first published by Digiday sibling WorkLife

The return to office appears to be stalling. Office occupancy has hovered around 50% all this year, according to data from Kastle Systems, a company that tracks office badge swipes. And companies now have a better picture of exactly how much of their office space is actually getting used. 

Accordingly, about 75% of businesses plan to reduce office square footage next year, according to a survey from hybrid work platform Robin, including responses from over 500 business owners and facilities managers. That’s up 30% from last year. It comes amid financial challenges pushing them to cut back on costs, but also as they consider exactly what kind of spaces staff need while working in-person on a handful of days a week.

The Robin survey also found about 40% of survey respondents said they are currently using only half of their available office space – and only 28% said they are using all of their office.

“Hybrid work is truly changing the patterns of when we use space,” said Robin CEO Micah Remley. “The question about leases getting let go of, that will absolutely rise,” he said. 

So what are they?

Shadow vacancies are essentially when a space looks occupied on paper, even if it’s not actually getting utilized by the tenant. The concern is that a swath of corporate tenants may not renew their leases in the future, sending vacancy rates up and further taking activity away from previously vibrant city centers. And while it’s not a new concept, it is getting more attention today as the full impacts of the pandemic become more clear.

Right now office vacancy in the U.S. is around 18% while about 80% of office space is currently occupied, said Julie Whelan, global head of occupier research at real estate firm CBRE. Office vacancy is expected to peak at the end of next year just below 20%.

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