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Commercial developers group NAIOP said distress in the office market has been concentrated in a small percentage of buildings that are functionally obsolete.

“Until these buildings are retrofitted, repurposed or demolished, a surplus of obsolete space will likely pose a headwind for the broader office market,” the NAIOP Research Foundation said in a second-quarter report.

The U.S. office market will decline through early 2024 before bottoming out and beginning a recovery, the report predicts. Another 24.4 million square feet of negative absorption is expected through the end of 2023, before recovering with 30.6 million of positive absorption in 2024.

The report’s forecast model is based upon projected economic activity, including a 60 percent chance of a recession in the second half of 2023.

NAIOP cited research by brokerage CBRE indicating that 10 percent of office buildings have contributed to 80 percent of the increases in vacancy since early 2020.

Since then, the widespread transition to hybrid work schedules has caused the nationwide vacancy rate to rise to 17.8 percent, the highest level since 1993.

In Connecticut, Hartford’s office market continues to see significant distress. Research by CBRE put the metro areas first-quarter vacancy rate at 23.7 percent, with 675,935 square feet of negative absorption during the quarter, much of it concentrated in Hartford’s northern suburbs. Average asking rent sits at $20.67, around $1 more per square foot than in 2020 and 2021, and not down significantly from the second half of 2022 despite the worsening market conditions.