Next Shoe Drops on Office Markets: State & Local Governments Dump Office Space amid Working-from-Home/Hybrid Model | Wolf Street

Many government jobs cannot be performed at home, but others can. And many employees find flexible work arrangements attractive, which makes it easier for governments to recruit and retain workers, in a historically tight labor markets where many businesses are already offering flexible work arrangements in order to be competitive.

The government of California already gotten rid of 767,000 sf of office space, for an annual savings of $22 million, and over the next three years will try to dump 20% of its leased office space, for $85 million in savings, California Department of General Services Deputy Director Monica Hassan told Bisnow.

In San Francisco, 26% of the total office space was on the market for lease at the end of Q4, a catastrophically high rate, and up from the single digits in 2018, and only slightly less catastrophic than Houston (31%) and Dallas Fort Worth (28%), according to Savills.

Older vacant office towers can be bought for cents on the dollar in the foreclosure sales that are now cropping up. For example, in Houston’s Energy Corridor, a 420,000 square-foot Class A office tower that was completed in 1983 and renovated in 2005, and was “valued” at $121 million in 2014, was sold in a foreclosure sale for $20.6 million

Next Shoe Drops on Office Markets: State & Local Governments Dump Office Space amid Working-from-Home/Hybrid Model | Wolf Street