Office Leasing Slowed In February As Occupiers Pressed Pause
However, tenant requirements were unchanged for the month, suggesting the decline may be temporary.
Office leasing slowed for the second straight month in February as occupiers pressed pause on new commitments, according to CBRE.
But the firm notes that tenant requirements were unchanged for the month, suggesting “the decline in leasing may be temporary, and that leasing may pick up as omicron caseloads continue to rapidly decline,” CBRE analysts note in a report breaking down its Pulse of US Office Demand research for the month.
The CBRE US Leasing Index posted its biggest monthly drop since the firm began tracking the data in March 2020, falling by 18 points month-over-month in February. The Leasing Index levels of 10 of the 12 markets the firm tracks fell in February, with the biggest declines in Seattle (-50 points), Atlanta (-39 points) and Denver (-21 points). Notably, Denver and Seattle remained among the top six markets for leasing activity.
Only Dallas/Fort Worth and San Francisco showed stability in their leasing index levels, unchanged at 93 and 40, respectively.
The US Tenants in the Market (TIM) Index was also unchanged at 89 in February, “signaling that the downturn in leasing activity may soon be over now that the omicron wave is receding,” CBRE predicts. Houston, Boston, and Dallas also had TIM Index levels exceeding pre-COVID levels, and Manhattan, Denver and Seattle are nearing pre-pandemic levels.
The US Sublease Availability Index was unchanged in February at 196, and has stayed at this level since September of last year. High sublease availability continues to hamper the broader US office market recovery, with nine of the 12 markets CBRE tracks recording an increase in their sublease inventory in February.
Overall, “office demand is expected to stabilize in the near term as more companies encourage employees to return to the office due to a sharp decline in COVID infections,” the report notes. “The improving health outlook and resurgent U.S. economy should support office leasing activity in the second half of 2022. Occupiers can capitalize on continued highly favorable market conditions due to the large sublease space glut.”