Still sluggish? Sure. But the office market is also showing some signs of life, according to the May office report released this week by CommercialEdge.
The first bit of good — or slightly good — news? The U.S. office vacancy rate fell to 15.7% in April, back to the same level it found in January of this year. That April figure also marks a year-over-year decrease of 30 basis points.
This might not be too surprising. Several companies have finalized their back-to-office plans. That has led to the slight dip in vacancy rates. The office market still faces plenty of uncertainty, but the dip in vacancy rate, no matter how slight, is still good to see.
CommercialEdge points to a trend that could boost the office market, locating office spaces into mixed-use developments. While the 2010s brought an increase of live-work-play mixed-use developments, the COVID-19 pandemic brought fears that this trend would fizzle as employees worked from home and foot traffic evaporated.
Today, though, this trend looks to be regaining strength. Many companies have now adopted hybrid work models, and they need the amenities that come with mixed-use developments to entice workers back to the office. Mixed-use projects offer in-place amenities like shopping and dining, which can help commercial tenants convince hesitant workers to come back to the office, at least two or three times a week. For owners and developers, a mixed-use model offers long-term resiliency through diversified space usage across a variety of asset types.
Unfortunately, in the Midwest Chicago is seeing some of the higher office vacancy rates in the United States. This rate stood at 20.2% in April, far too high.
Office sales volume reached $26.7 billion for the year in April. Of this, $13.25 billion originated in 10 markets that each surpassed $1 billion in office sales during the first four months of the year.
The national price-per-square-foot for office space reached $277 in April. And despite the office market’s troubles, developers still have 148.2 million square feet of office space under construction across the country.