With businesses bailing out of millions of square feet of office space since the pandemic, building vacancies in Dallas-Fort Worth have risen to the highest point in more than 20 years.

And unless leasing picks up, the amount of empty office space in North Texas is likely to continue growing this year.

At midyear, almost 50 million square feet of D-FW office space was vacant as businesses struggled to get workers back in the office and worries about a recession weighed on net leasing.

Throw in millions more square feet of sublease office space on the market and vacancy rates are headed toward 27%. The last time local office vacancies were so high was in the dot com era bubble and telecom sector shakeout of more than 20 years ago.

The metro area’s vacancy amounts to almost twice the total building space that’s in all of downtown Dallas’ big office towers.

“Depending on how you slice the numbers, we are back to the bad old days of the 1990s,” said Walter Bialas, senior analyst with commercial property firm Avison Young. “It’s hard to say where this is going to shake out. I’d like to see more green shoots than I’m seeing.”

The growing glut of office space isn’t just a D-FW problem. Major cities across the country are struggling to figure out what to do with millions of square feet of empty buildings left in the wake of the pandemic and changing work environments.

Employers sent their office staff home during the pandemic and they’ve been slow to return. Only about 62% of Dallas-area office employees are back in their buildings – and that’s only on the highest occupancy days, according to estimates from Kastle Systems, a security provider that tracks people entering and leaving office buildings. Less than 40% show up at the office on the lowest occupancy day of the week, usually on Friday.

Net office leasing in D-FW fell by more than 800,000 square feet in the first six months of 2023, according to brokerage company reports.

“Second quarter leasing activity was similar to first quarter and the lowest activity in years, underscoring that the market is still disrupted as tenants adjust their in-office versus hybrid strategies,” Bialas said.

He said most of the leases being signed are by small and mid-size tenants while many of the largest office businesses have put off making plans for new space.

Looking across the country, office vacancies are likely to remain below pre-pandemic levels through 2030, according to a new forecast from McKinsey Global Institute. In the worst case, office demand may fall by almost 40% in the most impacted cities.

“Employees still spend far less time working at the office than they did before the pandemic, according to our survey,” the report found. “In early 2020, as they adopted remote work and hybrid work in response to lockdowns and health concerns, office attendance in the metropolitan areas we studied dropped by up to 90%.

“It has since recovered substantially but remains down by about 30%, on average.”

More than 60% of the empty office space is in only about 10% of the buildings, according to an estimate by property firm Jones Lang LaSalle. The buildings with the lowest vacancy rates are usually older properties, in less desirable locations and with out-of-date amenities.

In D-FW, the office districts with the highest vacancy rates also have some of these older properties. In Dallas, the areas with the highest building vacancies include East LBJ Freeway with about 29% of offices empty and downtown Dallas where almost 27% of space is empty.

Office-using businesses aren’t helping the matter by giving back millions of square feet of offices in the last three years. Net office leasing in D-FW declined by almost 900,000 square feet last year and is down by almost that much so far in 2023, according to brokerage company estimates.

Most of the leasing is taking place in new buildings in Dallas’ Uptown district and along the Dallas North Tollway in Frisco and Plano. The best buildings saw an increase in occupancy in the most recent quarter, according to Cushman & Wakefield.

“This storyline is expected to continue for at least the remainder of 2023, if not longer, as companies pursue the best buildings with top amenities to bring employees back to the office and attract top talent,” Matt Schendle, Cushman & Wakefield’s vice chairman and Dallas office agency leasing lead, said in a statement.

About 5.3 million square feet of office space is under construction in North Texas. More than 65% of what’s being built is expected to open before the end of this year.

A quarter of the new space on the way is already spoken for. Two of the largest projects on the way are fully leased to house Wells Fargo workers in Las Colinas and Goldman Sachs employees in a new campus just north of downtown.

Speculative office starts are stalling under pressures of high interest rates and tighter lending standards.

Because of the surplus of space, owners of offices increasingly are looking at converting empty buildings to new uses including apartments, hotels and even storage space.

But the buzz about these building redos probably is overblown, analysts warn.

“It’s a great idea but the reality is it’s really expensive to convert office space to hotels or multifamily,” Bialas said. “The cost to do that is widely prohibitive and not doable without a lot of public sector support.”