The U.S. office sector continued to struggle during the second quarter of 2023, marked by negative net absorption, a surge in sublease space and an expectation that a recession is imminent. Five commercial real estate firms reported that occupiers were preparing for an economic downturn with most using the term “subdued” to describe Q2 activity.
Cushman & Wakefield’s “Office Q2 2023 MarketBeat” and Plante Moran Cresa’s “U.S Office Real Estate Market Summary | Q2 2023” both noted that a recession could arrive as soon as this year due to large amounts of leased space being put onto the sublease market – representing 2.9% of total office inventory – which is the highest on record since 2000 according to Cushman & Wakefield analysts . Additionally, tenants vacated nearly 40 million square feet more than they occupied in Q2 putting it on track for largest amount of negative net absorption ever recorded according to Plante Moran Cresa analysts .
Lee & Associates’ North America Market Report agreed with these findings pointing out how sublease space could be indicative of weakened demand over extended periods time..
Regarding outlooks, Cushman & Wakefield suggested vacancy has yet peak meaning it likely won’t start falling until late 2024 when economy should begin pulling out from downturn while Plante Moran Crea believes increasing Class A product delivery will further tip market into tenant favorability . On brighter side , Class A properties delivered since 2015 have experienced positive net absorption per PMC report while JLL was remarkably upbeat citing improved leasing momentum across markets indicating signs recovery may be beginning .. JLL also noted quality will become increasingly important factor motivating workers amid challenging labor market conditions going forward..
