Hybrid work arrangements are expected to exert further downward pressure on office demand as tenants continue the flight to quality assets that began at the onset of the pandemic, according to new research from Newmark.

The firm’s analysts predict that “high-quality assets in dynamic suburban markets may hold an advantage over traditionally stable Downtown assets,” with “relatively high availability, downward pressure on rents and greater demand for a vibrant worker experience” benefiting the upper tier of the office market.  Indeed, Class A leasing activity as a percentage of inventory outpaced the national average by 40 basis points in Q3, but Downtown markets continued to flounder, with NCREIF suburban office vacancy clocking in at 11.0% compared with 18.0% for Central Business District (CBD) office and 21.9% for the office market as a whole.

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