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2.1% Annual Rent Growth Despite Rise in Vacancy Underscores Landlord Optimism

February 03, 2022

HOUSTON – Following five consecutive quarters of negative net absorption, the office market appears to be turning a corner, according to Transwestern’s latest U.S. Office Market report. Fourth quarter 2021 net absorption registered 644,000 square feet, marking the first time the sector has reported occupancy growth since the onset of the pandemic. Boston, San Jose-Silicon Valley and Dallas-Fort Worth were the three largest contributors to this gain, posting quarterly absorption of 1.64 million square feet, 1.61 million square feet and 1.21 million square feet, respectively.

Of the 51 office markets tracked, 30% managed positive net absorption for full-year 2021, led by Las Vegas; Oklahoma City; Austin, Texas; and Raleigh-Durham, North Carolina. Also encouraging, 80% of tracked markets experienced net absorption above their quarterly average for the past year.

“While the office market is still feeling the effects of the pandemic, key indicators such as positive net absorption and upticks in office-using job employment are telling of a sector that is headed toward recovery,” said Elizabeth Norton, Senior Managing Director of Research Services at Transwestern.

Some measures, however, highlight that there are still hurdles to overcome. Uncertainty brought on by Omicron has contributed to delayed space decisions and depressed transaction volume. National office vacancy rose another 10 basis points to 12.6% in the fourth quarter, with a dozen markets posting vacancy over 15% as more than 13 million square feet of new space was delivered. Sublet available space remains above pre-pandemic levels in all but three markets, though 75% stayed constant or saw improvement from the previous quarter.

Amid this uncertainty, landlords remain optimistic that pent-up demand will soon begin translating to leases and have relied on generous concessions rather than lower asking rents to secure tenants. The average national asking rent increased to $25.72 per square foot in the fourth quarter, reflecting annual growth of 2.1%. Markets with the highest annual rent growth since the start of the pandemic – each surpassing 5% – include Miami; Las Vegas; and Westchester County, New York.

“In this environment, concessions have become a larger part of the story when it comes to market dynamics,” Norton said. “In 2021, tenant improvement allowances increased by an average of 15% in our top markets. Also, the number of months in free rent edged up, despite term remaining level.”

The increase in concessions was due in part to flight to quality and new construction elevating the average, but also landlords competing to attract tenants as users have significant negotiating power in select markets. Norton expects that over time, this will level out.

Download the full fourth quarter 2021 U.S. office market report here.

Insight from Transwestern CEO Larry Heard on office conditions can be found 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 and @Transwestern.

Media Contact:
Nataly Torres

Elizabeth Norton

Senior Managing Director - Research Services

Washington, District of Columbia

(202) 775-7026

Larry Heard

Chief Executive Officer

Houston, Texas

(713) 270-3306