Occupiers Search for Stability
Occupiers refocused on the efficient use of office space, resulting in a reduction in footprints and higher vacancy in 2023. Additionally, this reduction in footprints occurred as employers continued to add jobs. With more than two years since the expected return-to-office mandates, occupancy levels have hardly budged. As new hiring slows, many organizations are focusing on maximizing utilization of space with a hybrid work force, using lease expirations as a trigger to reset space needs, manifesting in smaller lease sizes and concentrating on highly amenitized premium spaces. There are some bright spots, as negative absorption continues to grow, the amount of sublease space on the market contracted during the fourth quarter. The lack of new construction and office conversions will likely help curb over-supply issues in the long-term.
Office Tenant View
- The bad news for landlords/owners has provided a generational opportunity for occupiers as they seek to renegotiate and push for more flexible terms.
- Tenants are provided more options in sublease space that may have been out of reach as they seek to provide the space and location to entice workers back to the office.
- The time to secure a lease is being extended as negotiations now may involve not just the owner, but also debt holders.
Download the full Q4 office report to learn more.