National Office Market Shows Mixed Signals

Since the onset of the pandemic, remote working prompted space users to reevaluate their office footprints. However, businesses still need physical space where their employees can collaborate—and flex space has become a popular short- and long-term solution, at lower real estate costs than a traditional lease. Investors are seizing the opportunity, too—A CBRE survey revealed that 86 percent of 77 global companies will include flex space as part of their real estate strategies going forward—but probably operating different revenue models than before COVID-19.

National average full-service equivalent listing rates averaged $38.62 per square foot in November, unchanged from October and up 120 basis points year-over-year. Similarly, the national office vacancy rate clocked in at 15.2 percent, 140 basis points higher year-over-year in November but 40 basis points lower than six months prior. Seattle led the way in this sense, with vacancy increasing by 630 basis points throughout the year, followed by Austin (600 basis points).

The office-using sector added 101,000 new jobs in November, up 4.1 percent year-over-year. Office-using employment continues to rebound from pandemic lows; As of November, the sector had 162,000 fewer jobs than in February 2020, with the information sector lagging by 123,000 jobs than it did before the pandemic. Only 37 of the 120 markets covered by CommercialEdge had more office-using employees than in February 2020.

Some 152.8 million square feet of office space was under construction across the nation at the end November, with the active pipeline contracting by 12 million square feet since January. Developers broke ground on 48.2 million square feet of office space year-to-date in November, less than the 58.9 million square feet started last year and the 86 million square feet started in 2019. Charlotte speaks to this trend; At 11.2 percent, the metro had the largest under construction pipeline as a percentage of existing stock in the nation at the beginning of 2021 and despite a constant flow of new deliveries, less than 500,000 square feet of new office space broke ground in the market this year.

Read the full CommercialEdge report, here.