Beware of scammers: Flatworld does not hire freelancers. Our projects are executed in our facilities across the globe. For vendor selection contact here.

New study suggests that small businesses might fill the office vacancy gap

A new study by Flatworld Solutions reveals that the commercial real estate market in 2024 faces challenges, like a 21.69% vacancy rate in San Francisco and delinquency rates being their highest since 2015.

Amid this high vacancy and growing delinquencies, small businesses have an opportunity to revitalize the market by adopting flexible workspaces like coworking and private offices. Increased searches for "small offices" and a surge in new business applications highlight a shift towards small and flexible office spaces. Small businesses may be able to address vacancy issues and strengthen the real estate market.

These disparities highlight the urgent need for increased adoption of telehealth as a solution to ensure equitable healthcare distribution and effectively address the growing doctor deserts across the US.

Key Takeaways

  • The commercial real estate market in 2024 has experienced a notable downturn, the price index decreased by 10% in one year.
  • With a 21.69% vacancy rate, San Francisco is on top of the office space vacancy rankings, followed by Houston and Dallas. With only 1.46% vacancy rate, Wilmington, NC, is the city with the lowest vacancy rate.
  • US search trends increased 52% for "Private office" since 2021, while "Office for rent" searches declined by 14%.
  • In April, Wyoming was the state with the most business applications per capita, with 837.93 applications per 100,000 residents.

Office Space Price Declining

After experiencing a rebound in 2023, the price of commercial real estate has witnessed a significant decline in 2024. This decline has resulted in prices reaching their lowest point since 2021, indicating a reversal of the previous upward trend.

The first quarter of 2024 has recorded the highest delinquency rate on payments since 2015. This indicates financial strain among commercial real estate owners and tenants, possibly due to economic challenges or changes in market dynamics. Our analysis showed a moderate negative correlation between the index price and the delinquency rate. This means that when the price index goes down, the delinquency rate rises.

Cities have the Highest and Lowest Vacancy Rates

Analysis of office space vacancy rankings reveals notable trends. The regions with the higher rates are well-established economic hubs. The cities with lower vacancy rates have probably more limited supply and are facing higher demand.

Small Office Space Search is Growing

In the Google Trends data, we observe a contrast between searches related to traditional office spaces and alternative workspace solutions. Specifically, there has been a 14% decline in search interest for "Office for rent," since 2021, while search interest for "Private office" has seen a 52% increase. Additionally, "Small office" and "Business idea" have experienced moderate growth, with respectively 18% and 5%. This suggests a shifting preference towards flexible and shared workspace solutions, indicating a potential trend where small businesses are replacing large office space.

States with The Most Business Applications

Those search trends show a growing interest for offices for small businesses. In addition, since 2020, the creation of new small businesses has almost doubled and stayed at a high level since then, with an average each month of 129.8 applications for new businesses per 100'000 inhabitants in the United States. The rise of small businesses opens the door to innovative solutions and opportunities in the market.

The findings highlight the difficult landscape of commercial real estate in 2024, with decreasing prices and escalating delinquency rates. Amidst these challenges, the growing interest in flexible workspaces and the surge in small business creation underscore evolving market dynamics and opportunities for innovation.

Methodology

We conducted a comprehensive analysis of the office space market by synthesizing data from various sources. Utilizing information from the Federal Reserve Economic Data, we examined the progression of commercial real estate. Data from the Census Bureau provided insights into the volume of new business applications. Additionally, leveraging data from the National Association of Realtors, we depicted the dynamics within cities exhibiting both high and low vacancy rates. Furthermore, we analyzed data from Google Trends to identify emerging trends in workspace preferences.