Marginally positive absorption ended a two-year trend of declining demand, though supply additions pushed vacancy to a record 13.9%. Increased owner occupancy and medical office usage contributed to higher occupancy rates, but small leases and rollover exposure suggest this improvement may be temporary. With office attendance at 70% of 2019 levels and high sublease inventory, further occupancy losses and value corrections are anticipated.
National office real estate trends
- Although lease sizes remain stubbornly below pre-pandemic norms, office users took up around 2 million square feet (SF) from April to June.
- Currently, 192 million SF is available for sublease, over half of which lies vacant.
- Developers completed only about 22 million SF in the first half of the year, the least in any six months for over a decade. Approximately 32 million more SF are expected in the remainder of 2024, bringing the expected annual total to less than 55 million SF.
- Leases representing about 25% of square footage leased before April 2020 are set to expire. The outlook is for a continued rise in vacancy, which is expected to approach 15.5% by early 2026.
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Information contained in this report is provided, in part, from third-party sources, including the U.S. Bureau of Labor Statistics, the Bureau of Economic Analysis, Engineering News-Record, and CoStar Group. Even though obtained from sources deemed reliable, no warranty or representation, expressed or implied, is made as to the accuracy of the information herein.
