According to Moody’s CRE, the national office vacancy rate reached a historic high of 20.4% in the fourth quarter of 2024. The average effective rents also saw a slight increase of 0.1%. In total, there was an increase of 80 basis points in vacancy rates over the past year, with Q4 alone accounting for 30 bps.
In their Q4 Preliminary Trend Announcement, analysts from Moody’s CRE including Thomas LaSalvia, Lu Chen, Nick Luettke David Caputo and Mike Pellegrini noted that after five years since hybrid and remote working models became widespread, a new trend is emerging which has resulted in a permanent decrease in office demand. This is due to more flexible or shorter leases as well as early-pandemic lease rollovers throughout 2024 leading to increased volatility in future office performance.
However, there are some positive signs according to Moody’s CRE. They observed that popular days for employees returning to work and stabilizing return-to-office rates suggest that companies may only be able reduce their physical footprint up until a certain point before reaching a new equilibrium. Their end-of-year outlooks for other sectors such as apartments retail and industrial were more optimistic.
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