The New Normal Has Arrived
Hopes for a mass return-to-work have not materialized and with nearly two years of stabilized trends, it appears that current attendance levels are now the norm. Additionally, slowing office employment growth has resulted in further occupancy drops and higher vacancy. While recession fears appear to have receded, the outlook for the office market is still downbeat. With stability and slow hiring, occupiers are focusing on the efficient use of space and general right-sizing their portfolio. With deal sizes down about 17 percent and the number of deals down approximately 10 percent compared to pre-pandemic levels, owners/landlords are eager to offer attractive concession packages. However, with instability in capital markets in the office sector and higher interest rates, closing lease transactions are taking longer to complete.
Office Tenant View:
- The lack of new construction is limiting some options for top-tier space as occupiers look for highly- amenitized offerings.
- 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.
- Many occupiers are taking advantage of favorable market conditions and concentrating on first-generation space.
Download the full Q1 office market report to learn more.