Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

What's Happening to Vacant Offices? - 5 2 2022 8 47 35 AM

Cities are taking office buildings that are now vacant due to remote work and turning them into apartments. But in many big cities, this is proving to be a slow process. (Quartz)

NH: In Houston, 24.1% of downtown office buildings are entirely vacant. In Phoenix, this figure is 20.2%. In Chicago, it’s 16%. In New York City, it’s 12.6%.

Overall, two years into the pandemic, downtown offices are seeing their highest vacancy rates in roughly 30 years. And as more businesses go permanently remote, the odds are that they’ll remain empty. (See “Americans Are Choosing to Work Remotely.”)

In response, some cities have already begun converting offices into other types of buildings. One obvious option is to turn them into housing, given that they’re already located in prime locations.

But this isn’t a simple process. Office buildings often do not meet the light and space requirements for residential buildings, and converting them can be even more expensive than new construction.

Nevertheless, the number of these projects is growing. The number of buildings being converted is still small (under 100), but the number of converted units is growing fast.

In 2021, office building conversions resulted in 7,415 new apartment units nationwide, nearly twice as many as the number of units created (3,723) in 2019 and six times the number created a decade ago.

Other offices are turning into e-commerce warehouses. In many cases, these are older buildings that are marking the end of an era.

Allstate’s headquarters outside Chicago, which opened in 1967, was sold late last year to a developer who plans to turn the 232-acre campus into a distribution center.

But this, too, isn’t proving to be easy: Now its neighboring suburbs are fighting over who will have the right to the new center’s tax revenue.

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.