While a few pundits are claiming (in somewhat Orwellian fashion) that the surge in empty commercial real estate is actually a chance for a utopian turnaround in the ashes of Covid weirdness, the potential for an "Urban Doop Loop" triggered by CRE is now being widely acknowledged as a possible trigger for a broader economic meltdown.

With a pre-existing problem amplified drastically by COVID-19 and then set in stone, the rising office vacancy rate has no real solution. The problem is slowly and steadily getting worse, becoming a "new normal" that simply can't go on forever without further economic repercussions. And this time is distinct from other major downturns in that during previous shocks, like 9/11 and the 2008 financial crisis, everyone more or less agreed that eventually, things would pick back up again. This time, it's permanent.

Take just a few examples:

New York — There's a new record for office vacancies in Manhattan, which have risen above 17%, and show no signs of slowing down. Vacancies have grown 70% in Manhattan since Covid (growing 20% nationally in the same period), with the Financial District hardest hit.

Pittsburgh — Currently sitting above 20% vacant, or 27% if you factor in subleases, it's estimated that nearly half of the city's commercial real estate could be empty within four years. If not reversed, a local crisis (at the very least) seems all but assured.

Portland — With the highest office vacancy rate in the nation — a mind-melting 30% or more — Portland officials are offering desperate pleas in the form of tax credits and other incentives to fill its deserted commercial buildings.

Los Angeles — Demand is so low for commercial real estate that, in one case, developers abandoned plans to build a shiny new 61-story office tower in place of an empty commercial building. Instead, they demolished it and installed a handful of EV charging stations.

There's no great solution. Most cities are floating quixotic proposals to turn empty offices into apartments to "fix" the crisis, but this is often too expensive to be practical and requires navigating lots of bureaucratic red tape, like changes to zoning laws.