84% of 390 metro areas saw office occupancy increase as of February, according to CoStar.
Office Space Market Turned Corner in Q3 2021
Workers began coming back to their on-site offices by the end of Q3 2021. Since that turning point when 30M square feet ((msf) or a rate of 10 msf/quarter were absorbed, the increase in office occupancy has only improved.
Despite office occupancy now being on par with pre-pandemic levels, there remains approximately 110 msf that are still vacant. Experts estimate it will take 11 quarters, or through the end of 2024, to reabsorb this as yet unoccupied office space.
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Boston the Leader in Office Space Gains in Past 12 Months
Boston had the highest net positive absorption rate among the 84% of 390 metro markets that added office occupancy over the last 12 months, according to CoStar.Life science companies are the primary drivers fueling Boston’s stronger office occupancy rate. As of February 23, some 3.75 M square feet in Boston have become occupied.
It’s worth noting that in the past 12 months, only Boston and San Francisco have had net positive absorption. The remaining four of the six major commercial metro areas continue to face negative absorption:
- New York – -6.4 msf
- Chicago -5.8 msf
- Washington DE – -3.9 msf
- Los Angeles – -1.1 msf
Additional Tech Metros Filling Offices
Other major tech metro areas are filling office spaces. Here are the top tech metros increasing their respective occupancy rates:
- San Jose – 3.5 msf
- San Diego – 1.6 msf
- San Francisco – 0.75 msf
- Seattle – 0.28 msf
Google just announced during the first week Of March that it expects its workers to return to their offices a minimum of 3 days/week beginning April 1.
Nationally, according to the US Bureau of Labor Statistics, 45% of mathematical and computer workers work from home for at least some part of the time.
South & West Regions Top Magnets for Office Occupiers
Metros in the South and Midwest regions of the country continue to be the strongest magnets for office occupiers. Take a look:
- Austin – 3.38 msf
- Dallas – 3.36 msf
- San Jose – 3.1 msf
- Atlanta – 6.6 msf
- Houston – 2.1 msf
Top Ten 12-Month Positive Net Absorption as of February 23
- Boston MA – 3,754,075
- Austin TX – 3,374,406
- Dallas/Fort Worth TX – 3,366,157
- San Jose CA – 3,107,210
- Atlanta GA – 2,638,257
- Houston TX – 2,121,210
- Las Vegas NV – 1,792,809
- San Diego CA – 1,630,621
- Palm Beach FL – 1,624,785
- Nashville TN – 1,567,498
Top Ten 12-Month Negative Net Absorption as of February 23
- New York NY – -6,423,753
- Chicago IL – -5,878,917
- Washington DC – -3,925,811
- Minneapolis MN – -1,406,544
- Kansas City MO – -1,131,057
- Cincinnati OH – -1,066,504
- Los Angeles CA – -1,055,726
- Pittsburgh PA – -918,809
- Philadelphia PA – -581,809
- Columbia SC – -574,358
Office Asking Rents Rising in 98% of Markets
Office asking rents in 98% of 390 office markets increased only +0.7% nationally but only because the major metro markets such as New York (-0.9%), San Francisco (-1.8%) and Washington DC (-0.4%) are weighing down average rent growth despite strong rent growth in other markets.
The top five metros areas with populations of at least 1M with the highest asking rent growth include:
- Palm Beach FL – +6.2%
- Providence RI – +5%
- Miami FL – +4.9%
- Las Vegas NV – +4.3%
- Tucson AZ – +4.1%
It’s anticipated that office asking rents are likely to grow between 1% – 2% in 2022 through 2014 due to the elevated vacancy rate of 12.3% and soon-to-be-completed 140 msf of new office space that will add and additional 1.7% to the current inventory of office space.
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Thanks to CoStar and the National Association of REALTORS®.
