Companies’ plans to bring employees back to the office have been scuttled once again thanks to the rapid spread of the Omicron variant. This leaves the U.S. office market in the same state of limbo that it’s been suffering through since the start of the pandemic.
The COVID-19 pandemic’s impact on the office market can be seen in the 2021 Year-End Vacancy Report for the Ann Arbor, Michigan, office and flex market released earlier this week by Swisher Commercial. As the report — a look at 306 office and flex buildings totaling nearly 11.7 million square feet in the Ann Arbor market — shows, the pandemic is causing both uncertainty and vacancies to rise in the office market.
According to Swisher’s report, six of the eight office and flex submarkets that the company analyzed saw vacancy rates rise. Only one office submarket and one flex submarket in the Ann Arbor area saw vacancy rates fall last year.
The report found that as of Dec. 31 of last year, the total Ann Arbor market vacancy rate for office and flex space stood at 10.3 percent. That’s a jump of 2.3 percent when compared to the vacancy rate of 8 percent at the end of 2020.
The overall vacancy rate for the Ann Arbor office market rose from 9.4 percent at the end of 2020 to 11.7 percent at the end of 2021, Swisher said. Flex space vacancy rates rose from 3.4 percent at the end of 2020 to 5.5 percent as of the end of last year.
Not surprisingly, Ann Arbor’s downtown office market saw a bigger rise in vacancies. Swisher Commercial reported that the office vacancy rate in this submarket rose to 14.2 percent by the end of 2021. That’s up 6.2 percent from the vacancy rate of 8 percent as of the end of 2020.
The reasons for the jump in downtown office vacancy rates in Ann Arbor are the same as they are in office markets across the country: Most companies are still letting employees work remotely. And many are planning a future that includes hybrid work, in which employees work part of the time from the office and part of the time from their homes. As these companies’ leases have expired, many are leaving the downtown area or downsizing to smaller office space.
And as long as the country continues to deal with COVID-19, expect office markets across the United States to continue to struggle with higher vacancy rates.