National office space market is very bad (reprint from Bloomberg)

Salt Lake Downtown Skyline at night

This isn't news, more of a reiteration.  This affects cities both in terms of urban, especially downtown, vibrance, but especially local government revenue streams, which tend to be dependent on commercial property taxes, especially in major cities.

There's lots of talk about office to residential conversion, but that will take a couple decades to have significant impact (Myths about converting offices into housing—and what can really revitalize downtowns, Brookings).  From Bloomberg:

Not long from now, almost one-quarter of all US office space may be vacant. And if work-from-home—the key culprit—persists, commercial-property values will be further decimated by up to $250 billion, Moody’s warns. When combined with the impact of lower rents and lease turnovers, the vicious post-pandemic cycle will reduce revenue for office landlords by as much as $10 billion. That in turn could translate into a quarter-trillion dollars of “property value destruction,” Moody’s officials said. The figures illustrate the gloomy prospects faced by property owners and lenders as employers continue to jettison square footage or shift from multiyear leases to shorter-term and more flexible co-working arrangements. A full 85% of North American organizations polled by brokerage Jones Lang LaSalle have implemented hybrid work, and occupancy across offices in major US cities is stuck at about 50% of pre-pandemic levels. Wavering demand and increased borrowing costs have slammed office valuations, especially among older buildings. “The argument for maintaining or even increasing remote work practices remains compelling for many businesses,” Moody’s said. “If productivity remains stable and costs can be reduced by forgoing physical office spaces, the rationale for mandating in-office attendance diminishes.”

====

Small downtowns may have an advantage because the cities are less unbalanced ("From Owatonna to Red Wing, Minnesota's small downtowns see resurgence," Minneapolis Star Tribune, archive.ph copy).  Also see "Revamping Nicollet Mall as a 24-hour district is one idea for downtown Minneapolis," MST, archive.ph link).

-- Downtown Next Report, Minneapolis Foundation