Firms Struggle to Find Workspaces They Like

The troubled U.S. office industry is starting the new year with a problem it hasn't contended with in years: Some business districts face a looming shortage of top-shelf workspace.

- PETER GRANT

Office vacancy overall remains near record levels in many cities, where a glut of unwanted and aging work-space is keeping a lid on rents and depressing office values. Decades of overbuilding made the U.S. office market vulnerable when the pandemic hit and remote work flourished.

More recently, big firms in technology, finance, transportation and entertainment are telling their employees they need to be in the office more often, in some cases five days a week.

These large tenants tend to want the same thing-buildings offering plenty of outdoor space, upscale fitness centers and restaurants, and locations near transport hubs. They are increasingly finding slim pickings, especially for hot spots such as New York City's Park Avenue, Miami's Brickell district and Century City in Los Angeles.

Yet even some tenants in cities that have been hit hardest by the glut of space, such as Washington, D.C., and Chicago, are shocked by the few choices on the top shelf.

"Brokers kept coming to us, and I was like: 'That's it? Is that the best you got?'" said Ira Coleman, chairman of McDermott Will & Emery, referring to the law firm's recent search for space in Washington, D.C.

Now, the country's largest office owners are moving to fill that void. After years when most developers wouldn't even consider new office projects, firms such as Hines and BXP have ones in the early planning stages or already under way.

SL Green Realty, New York's largest office landlord, told investors last month that tenant demand has been so strong that the firm hopes to buy a major development site by the end of this year.