US & Global Economic Impact Analysis and Forecasts

Freedonia analysts and economists are sharing their insights on how major events are impacting different parts of the US and global economies.

A Legacy of the COVID-19 Pandemic: Vacant Commercial Space

In a recent tracker, we discussed how Google is planning to build more offices and data centers in expectation of its employees returning to work at the office. This was noted as an anomaly, as many companies were planning on reducing their office footprints in expectation that more and more work would be done from home.

A pair of recent articles illustrate how pervasive this notion is, and how it offers a challenge to the construction industry.

The first article noted that many large firms were planning to sublease their unused space or, if possible, not renew their rental arrangements – putting millions of square feet of office space on to the market. While a potential boon to smaller firms or startups looking for inexpensive office space, the prospect of numerous office buildings and commercial parks with floors of empty space is daunting to owners and managers of these properties.

The second article showed that the US restaurant industry is also facing an issue of empty buildings, reporting that more than 10% of all US restaurants have closed permanently. While in some ways this is not as dire as was expected (some reports had 25% of all US restaurants closing), this is still grim news for many parties – restaurant employees, communities that relied on these businesses for tax revenues, and suppliers of food, beverages, and relative supplies.

The construction industry also faces a number of challenges in dealing with this glut of empty commercial real estate. Construction of new office buildings and restaurants will undoubtedly lag going forward, as there will be little need to erect new sites when thousands of inexpensive properties are available for rent or purchase. This will affect demand for a wide range of building materials and related products, such as plumbing fixtures and fittings. Furthermore, while many of these buildings will require some refurbishment when they are repurposed, most will have far less wear and tear than those were permanently. Thus, less of such materials as drywall, paint, and related items will be needed to get buildings back into working shape.

For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products and Consumer Goods areas. Related Freedonia Focus Reports include Real Estate: United States and Office Furniture: United States. Freedonia Custom Research is also available for questions requiring tailored market intelligence.