Surge in Office-Using Employment May Re-Energize Demand for Office Space
May 05, 2022
HOUSTON – After registering positive net absorption during fourth quarter 2021, occupancy gains reversed course at the start of the year, according to Transwestern’s first quarter U.S. Office Market Report. Though net absorption registered negative 1.9 million square feet, 23 of 51 tracked markets reported occupancy gains during the quarter. Approximately 47% of markets recorded annual positive net absorption, led by Las Vegas; Austin, Texas; San Jose-Silicon Valley; and Nashville, Tennessee.
Of the 1.7 million jobs added during the first quarter, 27% were office-using with employment placement agencies, consulting firms and tech companies leading the pack. The uptick in office-using employment, up one percentage point to 47.6 million, signals potential momentum for office space demand.
“Though absorption treaded into negative territory after a favorable end to the year, significant gains in office-using employment – more than double the 0.4% per quarter average pre-pandemic – offer a promising outlook for the office sector,” said Elizabeth Norton, Senior Managing Director of Research Services at Transwestern.
During the quarter, 15.5 million square feet of product delivered nationwide, 57% of which was not pre-leased, contributing to the rise in vacancy, up 20 basis points to 12.6%. Construction levels are subsiding with 147.6 million square feet of product underway, down 8.6% year-over-year.
“The ease in construction signals that the industry is responding to the oversupply of product. With flight to quality driving companies to modern, highly-amenitized office space, this might be an opportunity for landlords to consider creative uses for older product. Repositioning assets have the potential to turn the tide and alleviate vacancy rates,” Norton added.
Annual office asking rent rose to $25.86 per square foot, up 2.1% from a year prior. Landlords continue to hold firm on asking rents while offering generous concessions. Miami, Las Vegas and Charlotte have posted the highest rental growth since the onset of the pandemic.
Sublet space remains above pre-pandemic levels for all but three markets, and only 37% of markets stayed constant or saw improvement from the previous quarter.
Download the full first quarter 2022 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.
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