With the vacancy rate for office space in the major US cities almost at 20%, is now safe to conclude too much space was constructed in the first place?

America’s offices are emptier than at any point in at least four decades, reflecting years of overbuilding and shifting work habits that were accelerated by the pandemic.

A staggering 19.6% of office space in major U.S. cities wasn’t leased as of the fourth quarter, according to Moody’s Analytics, up from 18.8% a year earlier. That is slightly above the previous records of 19.3% set in 1986 and 1991 and the highest number since at least 1979, which is as far back as Moody’s data go…

That glut weighs on the office market to this day and helps explain why vacancies are far higher in the U.S. than in Europe or Asia. Many office parks built in the 1980s and earlier struggle to find tenants as companies cut back on space or leave for more modern buildings.

“The bulk of the vacant space are buildings that were built in the 1950s, ’60s, ’70s and ’80s,” said Mary Ann Tighe, chief executive of the New York tri-state region at real-estate brokerage CBRE.

And just as in the early ’90s, it is the overbuilt South that is hit hardest. Today, the three major U.S. cities with the country’s highest office-vacancy rates are Houston, Dallas and Austin, Texas, according to Moody’s. In 1991, Palm Beach and Fort Lauderdale in Florida and San Antonio held those positions.

This sounds like a cyclical market: during financial downturns, fewer companies want office space and vacancies rise. During economic success, more companies expand and make use of the space. When more space is built during the good times, that same space is not necessarily needed later.

Does that mean that COVID-19 was only a partial contributor to office vacancies? Was a reckoning going to come for urban office space even without a global pandemic? Or might office space be back in demand again soon as economic conditions change?

I can see why new office space is desirable to fund and build. Whether it should be built, given the cycles discussed above, is another story. And if office space cannot be easily converted to other uses, how much more is really needed in major cities?