According to a recent CNBC article, for the first time in 25 years, the aggregate square footage of office space is shrinking. In other words, there is more office space that is being redeveloped or removed than being added. According to CBRE data, by the end of 2025, over 23 million square feet of office space will be demolished or converted and only 12.7 million square feet is projected to be built. Office space in primary markets has experienced a high vacancy rate since the Pandemic. However, net absorption— the difference between the total amount of space leased and the total amount of space vacated within a period—has been positive for the past four quarters, which is indicative of a recovery. That said, removing excess office space will improve vacancy rates, which have been hovering around 19%.
Meanwhile in smaller markets like Whatcom County, we have been largely insulated from the office space exodus. Since the Pandemic, we have seen improved vacancy rates in the office space sector as more companies reduced or moved their office space from large cities in favor of opening offices or satellite offices in places like Bellingham that offer their employees a better work-life balance. Though not majorly impactful, we anticipate that having a tighter office market in larger cities, may likely result in a positive impact to our local office space market.