The office market has remained stagnant for several quarters, with limited absorption, high vacancies, and no significant growth in rent. However, the latest Q3 2024 reports show a glimmer of hope as absorption begins to pick up and the construction pipeline shrinks.
According to Colliers’ U.S. Office Market Statistics for Q3 2024 , this indicates that the U.S. office market may be on its way to recovery due to increased leasing demand and fewer new building completions.
All reports agree that vacancy rates are at their lowest since the Great Recession (per Colliers), with both Colliers and Lee & Associates’ North American Markets Report showing positive absorption in Q3.
On the other hand, Cushman & Wakefield’s MarketBeat Office report for Q3 2024 and JLL’s U.S. Office Dynamics report indicate negative absorption numbers but note an improvement compared to previous quarters. Additionally, despite ongoing hybrid work arrangements due to COVID-19, there has been a post-pandemic record of office attendance in Q3 2024 according to JLL analysts.
Another notable trend is the decrease in new construction projects across all reports. The Cushman & Wakefield report states that this is at its lowest point since 2012 while Lee & Associates notes it hasn’t been this low since 2013 – making it “the lowest on record.” This could potentially lead tenants towards higher-quality buildings rather than older Class B or C properties according to all three reports.
However, these tenants may face difficulties as fewer new buildings are expected over time – only one-fourth of recent averages by deliveries projected between now until late-2027 per Cushman & Wakefield analysts’ comments from their outlook section within their aforementioned quarterly publication above .
JLL also agrees with less newer developments being delivered; however they add more will likely be allocated towards other property types instead which could delay any potential progress. They also mention that “fully committed projects or developments in extremely strong micromarkets may see progress earlier if financial projections are particularly compelling.”
The Lee & Associates experts add to the discussion by noting that a significant amount of currently leased space has yet to roll over, meaning there is still more time for post-pandemic occupancy strategies to filter through the market. This could potentially lead to additional occupancy losses over the next two-three years according their analysts’ comments within their quarterly report above .
