Editorial: Filling office space might mean changing ideas

Supply and demand is a pretty simple concept. Give the people what they want.

If you see that one thing isn’t selling, you pivot to something else. It’s part of the legend of many a great fortune. Take Henry Heinz. Before he found success with the broad appeal of pickles and ketchup, an earlier business selling horseradish tanked.

Sometimes getting your supply to appeal to demand is more about marketing. Chainsaws were originally invented for surgery. It was no doubt easier to convince lumberjacks to use them than doctors. But sometimes it is the company that has to be convinced to deviate from the plan.

Blockbuster had all the same tools at its disposal as Netflix but was too invested in its storefronts to consider the threats of the home-delivery service and its eventual move to streaming. Today, Netflix has a value of about $190 billion; the last Blockbuster clings to life in Bend, Ore.

It’s not an unfamiliar story. Go to almost any city, and you can see empty malls that have failed to find new footing as shopping habits changed. You can see vacant big box stores that closed their doors because corporate leadership couldn’t admit that a culture of growth over stability was unsustainable.

And now, following the pandemic, office real estate is having its moment wrestling with this truth. Downtown Pittsburgh and surrounding neighborhoods like Cranberry, the East End and Southpointe are noting “the 7th consecutive quarter of rising vacancy rates,” according to a report from real estate firm Jones Lang LaSalle.

That’s just shy of two years of fewer and fewer office spaces being rented, reaching a market high of 22.5%.

You might think that high inventory would lead to what it does in the housing market — a fall in price. But no, the costs have risen. A newer, high-quality, high-amenity Class A building is up to $29.13 per square foot.

Let’s talk housing, though.

“There’s a mismatch right now,” said Dan Adamski, senior managing director at Jones Lang LaSalle. “We have too much office space and not enough housing. Somewhere in between lies the future.”

Obviously, you can’t just wave a wand and turn a law office into a two-bedroom apartment with a nice kitchen and a view. There are logistics like plumbing and legalities like zoning. It’s more complicated than it might seem.

But with more people valuing work from home, whether full time or hybrid, that is all the more reason to think ahead when considering use of space and future construction.

It also can be part of solving other issues like revitalizing areas that have lost their shine, bolstering the kind of service businesses that can’t work from home and addressing homelessness, not to mention preventing the onset of additional blight.

However, doing this needs an honest assessment of not just the supply but also the demand, and that can’t be addressed just by blaming workers who have made lifestyle changes. It means property owners and managers as well as municipal leaders have to give the people what they really want.