The U.S. office sector continued to struggle during the second quarter of 2023, with ongoing negative net absorption, an increase in sublease space and a belief that a recession is likely imminent. Reports from five commercial real estate firms indicated that occupiers are bracing for the likelihood of an economic downturn and used the term “subdued” to describe what went on in Q2.
Cushman & Wakefield’s “Office Q2 2023 MarketBeat” and Plante Moran Cresa’s “U.S Office Real Estate Market Summary | Q2 2023″ both note that a recession could arrive as soon as this year due to occupiers continuing to put leased space onto the sublease market – representing 2.9% of total office inventory – which is said by Cushman & Wakefield analysts to be “the most on record since 2000” . Additionally tenants vacated nearly 40 million square feet more than they occupied, according Plante Moran Cresa analysts who stated this puts 2023 on pace for having “the largest amount of negative net absorption on record”. Lee & Associates’ North America Market Report agreed with these findings pointing out how sublease space can act as an indicator for weakened demand over extended periods time .
Regarding outlooks ,Cushman & Wakefield suggest vacancy has yet peak meaning it won’t start falling until late 2024 when they expect economy will begin pulling out its downturn while Plante Moran Cresa believes increasing amounts Class A product being delivered market will further tip favor towards tenants . Despite all gloom doom JLL report was remarkably upbeat citing improved leasing momentum across markets indicating signs recovery beginning take shape albeit at slower rate then expected due back-to-work mandates improving physical occupancy midweek along quality becoming increasingly important motivating workers challenging labor market
