The office sector’s struggles in the wake of COVID-19 may finally be easing. Recent reports on the U.S. office market for the fourth quarter have shown a significant increase in net absorption, with positive trends in leasing activity and rental rates despite ongoing challenges in new supply and capital markets, according to JLL’s U.S. Office Market Dynamics.
Colliers’ U.S. Office Market Statistics Report also noted a decrease in vacancy due to limited new construction and conversions of existing buildings for other uses.
Lee & Associates North American Market Reports added that nearly one-quarter of under-construction projects are being built for owner-occupiers.
Analysts at Lee & Associates explained that this could mark an inflection point as employers begin revising their pandemic workplace policies, leading to increased demand for office space.
JLL and Cushman & Wakefield’s United States Office MarketBeat supported this assessment, noting a decline in available sublease space as another positive factor contributing to market recovery.
Furthermore, certain industries such as technology, finance,and legal firms have stabilized and are expanding their footprints within offices again according to JLL analysts.
While most tenants still prefer newer buildings with amenities,the shrinking construction pipeline has led occupiers towards considering options further down the quality spectrum,said Cushman&Wakefield.
Looking ahead,JLL analysts forecast an optimistic outlook by 2025 with expected growthin leasing volume driven by continued demand from large usersand favorable tenant requirements.
Meanwhile,Cushman&Wakefield researchers predict peak vacancy levelsby mid-2025due tonotable improvementsin fundamentalsand fewer constructions underway.New developments should continue performing well while older properties may require investment or conversion,and downtowns/central business districtsmay needto reevaluate their real estate mixaccordingtoCushman&Wakefieldanalysts.The post-COVID era is showing signs of recoveryfortheoffice sectorasdemand increaseswhilesupply remainslimited.Thisisgood newsfortheindustryasitmovesforwardfromthechallengesofthepandemic.
