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Overlooking the proverbial forest for the trees, real estate gurus are finally acknowledging the vast swathes of unoccupied space spreading across skyscrapers.

An onslaught of unused space is continuously sweeping through commercial buildings in major markets. Respected firms like McKinsey & Company have finally unveiled the painfully obvious: surplus vacant spaces are dragging down building values.

This revelation is hardly news; it’s a belated acknowledgment of a trend we’ve been highlighting since 2020.

I’ve penned a dozen articles since 2020 warning of this seismic shift in real estate, a shift that too many have turned a blind eye to.

I’ve previously written: “Across the country from San Francisco to New York and in between in places like Chicago, Denver, Houston and Austin, commercial real estate owners are feeling the effects of this real tsunami which caused vacancy rates to surge. These rates will never go back to pre-pandemic levels. It has caused what I call the ‘reverse of musical chairs’ within corporate leasing, where more and more commercial space becomes available as less and less demand weakens the market, due to many corporate tenants reducing the number of employees who work out of the office. Remote jobs are becoming permanent and that translates to fewer commuters coming to downtown areas requiring office space.”

The most incisive article on the matter reveals a staggering billion square feet of vacant space across commercial office buildings in many major cities domestically and internationally. But the tale doesn’t end here; we’re far from a downturn in high levels of vacancies.

The first wave of this commercial real estate tsunami, triggered by the pandemic, resulted in an unprecedented surge in office vacancies. An even bigger wave lurks on the horizon, threatening to further rock the national economy and the financial institutions bearing the brunt of these vacancies— affecting not just Class B buildings but also Class A and “premier” address-type structures.

The initial wave—the crash of corporate leasing in commercial buildings across the country—pushed vacancy rates into double digits. Most property management firms and building owners were caught unawares. Despite repeated warnings in this very publication, many failed to safeguard themselves from the tidal wave, choosing instead to bank on misguided experts who expected a swift return to normal.

When the pandemic hit and remote work began in earnest, I noticed companies starting to downsize their physical presence. One such corporation I’ve followed since 2020 has shed over 50% of its office space leases. Imagine the expenses slashed by enabling employees to work from home.

As the crisis unfolded, city by city, some civic leaders naively assumed their downtowns would remain unscathed. Now, as they grapple with the impact, they’re pinning their hopes on government bailouts for recovery.

Investors in smart cities and smart buildings should pay attention to our latest podcast, addressing the challenges and pitfalls in this post-pandemic economy. Many have failed to grasp the magnitude of what’s unfolding right in front of them. Just as one may fail to see the forest for the trees, these real estate leaders are blindsided by the growing vacancies in their skyscrapers.

Alongside several colleagues, I joined a panel discussion for a series of podcasts, focusing on smart city and building concepts. Our entry was aptly titled, “Smart Cities, Smart Buildings and their Investors, Beware of the Digital Hucksters.”

As I forecasted earlier this year, the second wave will bring a “deluge of debt” to regional banks with stakes in commercial real estate failing to meet previous valuations. The deluge is already upon us.

The second wave has arrived, and property giants like Brookfield in Los Angeles are feeling the hit. They have taken two Class A buildings back to the bank for bankruptcy proceedings: the Gas Company Tower and EY Plaza. These buildings represent a staggering $1.1 billion in default. The question now is, how many other buildings across the country are teetering on the edge of default?

And what about 61 Broadway in New York City? That’s another $240 million casualty of the second wave.

More defaults are on the horizon as more companies shrink their corporate leasing and the “reverse musical chairs” phenomenon continues to dictate the commercial real estate market’s tune.

Real estate firms across the board must reassess their portfolios to identify properties worth retaining and those to discard or revamp, all in a bid to stay afloat in these uncertain waters.

James Carlini is a strategist for mission critical networks, technology, and intelligent infrastructure. Since 1986, he has been president of Carlini and Associates. Besides being an author, keynote speaker, and strategic consultant on large mission critical networks including the planning and design for the Chicago 911 center, the Chicago Mercantile Exchange trading floor networks, and the international network for GLOBEX, he has served as an adjunct faculty member at Northwestern University.