Return to office plans in the fourth quarter were thwarted with the surge of a new COVID-19 variant, Omicron. The latest variants’ highly infectious nature compiled the pressure on occupiers to push the much-anticipated return to office even farther down the road.
Overall vacancy levels at the end of the fourth quarter continued their upward trend to 17.2%, ending the year 200 basis points higher than a year prior. This increase has been driven by the increase in vacancy rates in Class A and B properties. On the other hand, Trophy building vacancy rates have dropped 230 basis points to 17.9% at fourth quarter close, down from 20.2% a year prior. This further highlights the flight to quality trend seen since the onset of COVID.
Landlords’ efforts to prevent rental rates from plummeting have been somewhat fruitful with ever-increasing concession packages seemingly holding off rental rate downfall. Overall asking rates ended the year at $57.66/SF marginally down from $57.81/SF a year ago.
Leasing activity in 2021 ended on a high note, with north of 6.5 MSF of deals signed by the end of the fourth quarter, compared to 4.8 MSF in 2020. Recovery is slowly inching closer, but long-COVID symptoms linger on.