Office Vacancies in Some Areas at Record High, But What Do I Think of the Future?

Much of the United States office markets are still experiencing vacancy rates in around 20%, and in the San Francisco Bay Area even higher, with Oakland at 29% and San Francisco at 35%. I have mentioned previously that the Amazon announcement mandating five-day a week return to office may have a positive impact on forcing some workers back to the office, but there may be a lot of folks who relocated out of the area who really enjoy working remotely and not having to commute 2-3 hours a day who will seek other, more flexible employment. There have also been recent articles that the mandates may also be a tool for reducing employee headcount without the financial burden involved in laying off employees. I’m not an expert in HR but if someone quits because they don’t want to come to the office five days a week versus if the company lays them off and has to pay severance and benefits…There is also the unspoken possibility that Artificial Intelligence may be having a much larger impact on how many employees are needed to get the job done. I’m going to stick my neck out and predict that it will take years for the office market to fully recover, if it ever does, and tenants should grab the great concession-laden office deals out there, and Landlords, depending on the cost of tenant improvements and how restricted they are by lender covenants, bend over and take crazy-low deals to get as much cash flow as possible during these most trying times. What do you think?