Despite Negative Net Absorption, Quarterly Average Most Improved Since Q1 2020
November 08, 2021
HOUSTON – The economy’s recovery of all office-using jobs and an increase in tour activity signal improvement for the national office market, according to Transwestern’s latest U.S. Office Market report. Third quarter net absorption registered negative 5.5 million square feet, reflecting a 66% improvement from the previous quarter’s negative 16.1 million square feet.
Further, of the 51 markets tracked, approximately 20% managed positive net absorption over the prior 12 months, led by Oklahoma City; Austin, Texas; Salt Lake City; and Miami, and more than 85% reported net absorption above their quarterly average for the same period.
“The Delta variant did stall office market recovery during the summer, which impacted the third quarter,” said Elizabeth Norton, Senior Managing Director of Research Services at Transwestern. “Select indicators, such as tour activity and tenant engagement, are promising and we expect to see pent-up demand emerge late 2021 and into the first quarter of 2022.”
Though the national office vacancy rate saw a slight 20-basis-point uptick to 12.6%, average asking rent in the third quarter increased to $25.56 per square foot, a growth of 2.1% year over year. In six markets, including Miami; Las Vegas; Greensboro, N.C.; Minneapolis; Austin; and Los Angeles, asking rents rose more than 5%.
However, this was not the case in the nation’s largest and densest office markets. Since the start of the pandemic, asking rent in both San Francisco and New York has fallen by $12 and $5.50 per square foot, respectively. This has narrowed the margin across rental rates nationally, with San Francisco topping the list at $56.70 per square foot in the third quarter.
“The trends we’ve been used to seeing have changed as a result of the pandemic, opening the door to new opportunities for both owners and tenants,” Norton said. “Now one of the biggest questions is how companies will reconfigure their space to account for new work patterns and employee expectations.”
Download the full third quarter 2021 U.S. office market report here.
About Transwestern Real Estate Services
Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.
The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, and investment management. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.