After two years of uncertainty, the “hybrid” work arrangement has emerged as the preferred model for most office tenants. The hybrid model has resulted in a decreased demand for the amount of office space needed, as well as an influx of sublease listing on the market.
Q4 2022 marks two consecutive quarters — and seven of the past 10 — of negative net absorption, and national vacancy rates are the highest level recorded since the Great Recession more than a decade ago. With an economic downturn projected in the future, many companies are planning for layoffs, which would result in an even more marginalized demand for space.
National office real estate trends
- Vacancy is anticipated to reach a record low of 13.6% in the beginning of 2024.
- More than 230 million square feet is available for sublease. This number is 90% higher than the pre-pandemic number recorded in Q4 2019.
- Landlords and owners are granting free rent and generous tenant improvement packages in lieu of lower rent.
- Construction starts have slowed quickly: prior to the pandemic, construction starts averaged 20.8 million square feet per quarter. Post-pandemic, starts average 14.9 million square feet per quarter, representing a 28% reduction.
- Sales volume and pricing remain strong, but a significant slowdown in transaction activity is likely in the coming months.
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If you’d like to learn more about the nation’s office real estate outlook, download the full report below. This report will give you full insight to the topics mentioned above along with a variety of other statistics to help you stay ahead of market trends.
