Office vacancies are rising across America. Moody's Head of Commercial Real Estate Economics Thomas LaSalvia joins Yahoo Finance Live to discuss this trend.

LaSalvia states that office vacancies are currently at "a record high," on their way "to peak above 20%" and possibly remain there for years. He attributes this development to office spaces not having enough income to "be able to kick the can" until interest rates lower and refinancing can occur.

However, LaSalvia notes that not all properties are in "rough shape." He explains that areas such as Nashville, Tampa, and Kansas City are seeing more offices relocate there. As talent migrates to "more affordable locations," there has been a dispersion of where offices "want to or need to locate" in order to attract this talent.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Angel Smith

Video Transcript

[AUDIO LOGO]

JOSH LIPTON: Moody's releasing a new report highlighting that office vacancies are hitting an all-time high. One of the authors of that report expecting that things are going to get worse before they get better. We have that author here for more, Thomas Lasalvia, Head of Commercial Real Estate Economics at Moody's. Thomas, it is good to have you on the show. So maybe just start high level, Thomas, what do office vacancies look like right now across the country? We see different reports, Thomas, but what's your read?

THOMAS LASALVIA: Yeah. Thanks for having me. Currently, we're sitting at 19.8% vacant at the National level. Now this is a record high. The previous record was set in the late '80s, early '90s, which was a combination of a run up in new supply, along with the savings and loan crisis. That rate hit 19.3%, 19.8%. And as you said, it's likely going higher.

JULIE HYMAN: So Thomas, what are the implications of all of this? This is something we've been struggling with, right? Because we knew the vacancy rate was high, although 19.8% is pretty darn high. You know, who owns that real estate? Who owns the debt? We've been waiting for this sort of CRE cascade for a while. It hasn't arrived, at least not to the magnitude. But does this imply it's still coming?

THOMAS LASALVIA: That may be going a step too far. Are we going to continue to see more and more stress for rents and occupancy levels? Yeah. In fact, I think effective rents, so including concessions, they're going to likely come down a bit more. The vacancy rate is likely to peak above 20% and probably sit there for a few years.

And I think that's the key, is that we're still in this slow bleed period when it comes to the income being produced by a lot of these office properties. So when you talk about stress on the debt side or the equity side, well, it's all about the mathematics of do you have enough income still coming in and likely to come in over the next few years to be able to kick the can until we get to maybe a lower interest rate environment and refinancing can actually occur at levels that make sense for banks and other lenders out there.

JOSH LIPTON: And Thomas, I'm interested, when we talk about this trend of office vacancies across the country, we talk about them nationally. But are there regional differences to call out?

THOMAS LASALVIA: Yeah, I think that's fair, right? We look at these headline numbers and it's easy to sensationalize and think all locations, all properties are really in rough shape, when that's not particularly the case, right? Right now, we're in a period I think more than ever where employers are following their most valuable input to production, which is talent.

And so as talent has migrated towards more affordable locations across this country, we've actually seen a bit of a dispersion of where office firms want to or need to locate. So we're seeing places like Nashville, and Tampa, and Omaha, Kansas City, places that never really were primary office markets start to pick up a little bit of momentum.