The Market Favors High-Value Office Assets

Nationally, the office market appears to be stagnant; however unique geographic trends are emerging. Data from JLL shows a concerning national trends in the office market, from a decline in occupancy to an increase in sublease space. However, recent data from REIS Moody’s Analytics has found that individual markets reveal emerging trends in market activity.

According to JLL, the dramatic decline in office activity during the second quarter sparked third quarter volatility. Many firms are choosing to stay in place and wait out the uncertainty, and firms with lease renewals are using three-to-five year lease extension options. As a result, 55% of national leasing came from renewals in the third quarter. An increase in givebacks have also led to a 28.9 million-square-foot decrease in occupancy. This is the largest single-drop in a quarter on record, and it brought the vacancy rate to 16%. Unsurprisingly, this has also led to an  excess of sublease space. The market is now larger than it was during the dot-com era, and JLL expects the market to reach 150 million square feet.