The Office Market Is Dead (But Not for the Reasons You Think)

The Convenient Lie

Mainstream narrative: "Remote work killed office real estate!"

Reality: Remote work was the final blow to a sector that's been on life support since 2008.

Office real estate was already dying. COVID didn't kill it—COVID just made it socially acceptable to admit what everyone already knew:

Most office buildings suck, and nobody wants to go to them.

The Pre-COVID Office Fantasy

Let's time-travel to 2019, back when we pretended everything was fine:

The Class B/C Office Hellscape

Typical suburban office park:

Built in 1987
Popcorn ceilings (asbestos-flavored)
Fluorescent lighting (depression-inducing)
HVAC from the Reagan administration
Carpet that smells like divorce and broken dreams
"Amenities": A vending machine and a microwave

Vacancy rate (2019): 12-15%

Translation: Even when everyone worked in offices, 12-15% of space was unwanted. But sure, let's blame Zoom.

The Suburban Office Park Death Spiral

1990s: "Build office parks 30 miles from downtown! People love commuting!"

2000s: "Why is our vacancy 20%? Must be the economy."

2010s: "Millennials don't want to work in suburban office parks? Entitled generation!"

2020s: "Remote work killed us!"

Actual problem: You built soulless concrete boxes in the middle of nowhere and acted shocked when people avoided them.

What Actually Killed Office (Spoiler: Not Zoom)

1. We Built Too F*cking Much

Office construction (2010-2019): 800+ million square feet

Demand growth: 400 million square feet

Math: We overbuilt by 2X.

Industry response: "This is fine."

2. Flight to Quality Was Always Happening

Pre-pandemic trend: Tenants ditching Class B/C for Class A

Reason: Class A has:

Natural light (radical concept)
Modern HVAC (breathable air)
Amenities (more than a sad coffee pot)
Walkable urban locations (restaurants exist)

Class B/C landlords: "Why are we struggling?"

Also Class B/C landlords: [Does nothing to improve buildings]

3. Open-Plan Offices Were Already Hated

2015: "Open offices increase collaboration!"

2019: Everyone's wearing noise-canceling headphones and hiding in conference rooms

Employees: "We hate this."

Companies: "Have you tried more collaboration?"

COVID: "What if... you didn't have to go to the office?"

Employees: "BEST. PANDEMIC. EVER."

The "Return to Office" Delusion

Corporate America has spent 3+ years demanding that workers return to offices.

How's that going?

Occupancy Rates (2025)

San Francisco: 48% of pre-pandemic (oof)
New York: 62% (struggling)
Austin: 58% (the "hot" market)
National average: 55-65%

Translation: Even with mandates, 35-45% of office space is structurally obsolete.

The RTO Theater

Monday-Thursday:

"We require everyone in the office!"
Office is 40% full
People schedule all their meetings on Zoom anyway
Everyone leaves at 3 PM

Friday:

"Optional work-from-home day!"
Office is 15% full
Those 15% deeply regret their choices

Leadership: "We need to preserve our vibrant office culture!"

Actual office culture: Everyone avoiding each other in a half-empty building

The Class Warfare in Office Real Estate

Class A: Mostly Fine (For Now)

Trophy buildings in major cities:

Occupancy: 75-85%
Rent growth: Positive
Outlook: Stable-ish

Why: If you HAVE to go to an office, at least make it nice.

But even these are struggling compared to pre-pandemic.

Class B: Choose Your Own Adventure

Option A: Spend $50-100/SF upgrading to Class A standards

Cost: $50M for a 500K SF building
Outcome: Maybe competitive
ROI: Questionable

Option B: Convert to residential

Cost: $150-250/SF
Outcome: Depends on zoning, floor plate, market demand
ROI: Coin flip

Option C: Pray and extend loans

Cost: Your dignity + refinancing fees
Outcome: Slow death
ROI: Negative

Option D: Default and hand keys to lender

Cost: Your equity
Outcome: Sweet freedom
ROI: Technically infinite (can't lose more than 100%)

Class C: Already Dead

Current state:

30-50% vacant
Tenants on month-to-month
Deferred maintenance = "deferred" since Bush administration
"For Lease" signs since 2022

Likely fate:

Demolition
Conversion to storage
Urban blight
Surprising final act: Bitcoin mining facility

The Conversion Fantasy

Everyone: "Just convert offices to apartments!"

Reality Check:

Why Most Offices Can't Convert

Floor plate too deep:

Office: 60-100 feet from core to window (fine, just walk)
Residential: Maximum 40 feet (humans need natural light)
Solution: Cut building in half? Cool, still not profitable.

Window count insufficient:

Office: Windows every 20 feet (acceptable)
Residential: Every unit needs windows (crazy, right?)
Result: 30% of floor area is un-leasable

Mechanical systems wrong:

Office: Central HVAC (controlled by building)
Residential: Individual climate control (controlled by tenant)
Conversion cost: $$$$$

Bathrooms in wrong locations:

Office: Shared bathrooms every floor
Residential: Every. Single. Unit.
Plumbing retrofit: Even more $$$$$

Zoning doesn't allow it:

City: "This is zoned commercial"
Developer: "Can we rezone?"
City: "Let me think about that for 18 months"
Developer: "..."

When Conversion DOES Work

Ideal candidate:

Built pre-1960 (narrow floor plates)
Downtown location (demand exists)
High ceilings (9+ feet)
City offering incentives (tax abatements, fast-track zoning)
Building bought for $20/SF (desperate seller)

Reality: Maybe 10-15% of office buildings qualify.

Narrative: "The solution is conversions!"

Math: Not even close to enough.

The Lending Crisis No One's Talking About

Office CRE debt maturing 2023-2025: $1.5 trillion

How much is in trouble? 15-30%

Translation: $225-450 billion in bad office loans.

The Extend-and-Pretend Game

2023: "Our building is 60% occupied, let's refinance"

Lender: "Appraised value is 40% below your loan balance"

Borrower: "Can we... not do this?"

Lender: "How about we extend the loan and pretend everything is fine?"

Borrower: "Perfect!"

Taxpayers: "Wait, who's backstopping this?"

Government: "Don't worry about it."

The Default Wave (Coming Soon)

Current strategy: Deny, delay, extend

Inevitable outcome: Mass defaults in 2025-2027

Who gets hurt:

Regional banks (over-exposed to office)
REITs (loaded with Class B/C)
Pension funds (bought the AAA-rated CMBS)
Cities (property tax base evaporates)

Who wins:

Distressed debt buyers (pennies on the dollar)
Demolition companies (busy times ahead)
People who predicted this (can't spend "I told you so," unfortunately)

What Should Actually Happen (But Won't)

1. Accept That We Overbuilt

Reality: We don't need 6 billion SF of office in the U.S.

Actual need: Maybe 4 billion SF (if we're generous)

Solution: Demolish 2 billion SF.

Probability of happening: 0%

Why: Denial, debt, and delusion.

2. Repurpose Intelligently

What we should do:

Convert viable buildings to residential
Convert others to schools, medical, light industrial
Demolish the rest and build housing

What we'll do:

Debate for 10 years
Form task forces
Issue reports
Do nothing
Act surprised when buildings decay further

3. Fix Zoning

Problem: Most cities have inflexible zoning that prevents adaptive reuse.

Solution: Allow mixed-use conversions by-right.

Probability: 5%

Why: NIMBYs, bureaucracy, and politicians who think "process" is more important than outcomes.

The Office Investment Playbook (For Brave Souls)

Don't

Seriously. There are better ways to lose money.

If You Insist...

Only consider:

Class A in gateway cities
Medical office (actually increasing demand)
Life sciences (lab space is different)
Conversion plays (if you know what you're doing)

Avoid at all costs:

Suburban office parks
Class B/C anything
Single-tenant buildings
Anything built 1970-2000

Underwriting assumptions:

25-35% vacancy (not 5%)
Rent growth: 0% (not 3%)
Exit cap rate: +200 bps (not compression)
Hold period: 10+ years (not 5)

If the numbers still work: You're either lying or you've found the deal of the century.

The Uncomfortable Truth

Office real estate is experiencing a structural reset, not a cyclical downturn.

What that means:

20-30% of stock becomes obsolete
Values decline 40-60% in many markets
Recovery takes 10-15 years (not 3-5)
Many buildings never recover

But hey, at least we'll have plenty of material for future "What were they thinking?" retrospectives.

The Bottom Line

Office isn't dead because of remote work.

Office is dead because we:

Built too much
Built it badly
Built it in terrible locations
Refused to adapt
Pretended everything was fine

Remote work just exposed the rot.

The real question: How many more years will we pretend otherwise?

At USLand, we're honest about office real estate. We'll show you the few opportunities that make sense. And we'll steer you away from the dumpster fires.

Sometimes the best investment is the one you don't make.

Explore non-office real estate at USLand.com (seriously, avoid office)

Disclaimer: Office landlords may experience denial, anger, bargaining, depression, and acceptance. Most are stuck at denial.