How Fast Can a "Shortage" of Office Space Turn into a "Glut?" San Francisco Shows How Fast

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How Fast Can a “Shortage” of Office Space Turn into a “Glut?” San Francisco Shows How Fast
by Wolf Richter • Oct 25, 2020 •

Commercial real estate is in turmoil, but San Francisco’s glut is dwarfed by the fiascos in Houston and Calgary.
By Wolf Richter for WOLF STREET.


During the Good Times, when there was still a “shortage” of office space in hot markets, such as in San Francisco, companies resorted to warehousing of office space. They leased office space they didn’t need, and wouldn’t need for years, because they didn’t want their expected growth, and the expected growth in staffing, to be crimped by the shortage of office space.

They grabbed all available office space and leased it long-term, expecting to grow into the space in future years, thereby creating an artificial shortage.

Tech and social media companies and richly funded startups are infamous for that. And since money is no objective for these companies when they’re in rampant growth mode, or when they’re trying to be in rampant growth mode though they might not yet have much in terms of revenues or growth, it’s OK to blow money on vacant office space – until suddenly it isn’t.

As these leased offices sat around vacant, waiting for things to happen, suddenly things happened. The Pandemic put work-from-home on the map, and companies figured out how to manage it, and how at least some of their current and future staff would be working remotely, thereby shifting office expenses, including rent, from the company to households. ..........................(more)

https://wolfstreet.com/2020/10/25/how-fast-can-a-shortage-of-office-space-turn-into-a-glut-san-francisco-shows-how-fast/