Office Glut.

            Carl Becker coined the phrase “every man his own historian.”  What he meant is that humans naturally think in historical terms.  They look for the distant and complex origins of contemporary events.  Here is an example.[1] 

            Once upon a time, an inane on-line discussion took place among history professors over the question “who created more jobs, Ronald Reagan or Barack Obama?”  They were delighted to show that Obama had a much better record on job-creation that did Reagan.[2]  Curiously, none of them referred to the historical context of the two presidencies.  In Reagan’s first term, Fed Chairman Paul Volker jacked up interest rates to break the 1970s inflation.  The economy slowed to a painful degree.[3] 

            Seeking to goose the economy, the Reagan administration changed aspects of the tax laws.  One element of the changes came in accelerated depreciation rates for commercial real-estate, like office buildings.  Financed in many instances by savings-and-loan associations, office buildings popped up all over the place like dandelions.  Actual total demand for a product is hard to estimate when there is a lot of money to be made from making more of the product.[4] Over-building occurred.  Vacancy rate rose.  New office construction plunged. 

Then the growing economy during the 1990s slowly grew into the surplus office supply.  Vacancy rates fell some.  A bunch of the new tenants were “start-up” tech firms of the “dot-com” bubble.  The bursting of this bubble pushed up vacancy rates again.  They stayed high.  However, a lot of foreign capital poured into the American economy in the first part of the 21st Century.  Much of it went toward construction.  As building continued, newer construction pulled tenants away from less-new construction. 

This building ignored one of the changes that flowed from the sub-prime mortgage collapse.  Companies started cutting costs by shifting workers from individual offices to cube-farms.  Although a miserable experience for employees, it did reduce the amount of floor space a company had to lease.  It was a hard-headed sort of adaptation. 

In the view of some people, visions of sugar-plums, in the form of anticipated changes in the economy, danced in the heads of investors in co-working spaces.  Venture capitalist took a chance by supporting such companies in their efforts to lease a lot of vacant office space.  The space didn’t really stop being vacant.  It just was leased. 

The now-obvious solution would have been to build less, or tear down a lot of older construction, or to adapt some of the construction to some other function.[5]  Tearing down something doesn’t make money for anyone but the wrecking crew.  Structures built for one purpose can be difficult to adapt to another purpose. 

Then came Covid and remote work.  As the Russian guy says in “The Russians Are Coming,” now “everyone is blaming you, Whitaker Walt.”  Not entirely correctly. 


[1] Konrad Putzier, “Office Glut Started Decades Ago,” WSJ, 24 August 2022. 

[2] The academic profession leans left in the same way as the military leans right. 

[3] In Obama’s first term, Fed Chairman Ben Bernanke cut interest rates to below zero to respond to the sub-prime mortgage disaster.  The economy recovered. 

[4] As Sinclair Lewis once said, “It’s hard to get a man to understand something when his job depends on not understanding it.” 

[5] Warehouses, say, or apartments. 

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