The last 18 months have been tough on the U.S. office market. The COVID-19 pandemic has kept many companies in work-from-home mode. And the future looks uncertain: How many office tenants will reduce space as more employees work remotely?
But there are signs of hope for this sector. A big one? Asking rents for U.S. office space have risen steadily this year.
According to CommercialEdge’s latest National Office Report, the average asking price for office rents hit $38.60 a square foot in the top 50 U.S. markets in June. That continues the steady upward trend in asking rents seen throughout 2021. CommercialEdge reported that in June, office listing rents were 1.1 percent higher than they were during the same month a year earlier.
The average office vacancy rate held steady, too. CommercialEdge reported that in June this number stood at 15.6 percent across the top 50 U.S. office markets. That number is unchanged from a month earlier. Unfortunately, it is still higher than it was a year ago. According to CommercialEdge, the average U.S. office vacancy rate was 240 basis points higher in June than it was a year earlier.
The pandemic hasn’t put a stop to office sales. According to the report, $30 billion worth of office assets have changed hands in the top 50 U.S. markets since the beginning of the year. Because investors are focusing on the highest quality of assets, office properties across the country traded for an average of $283 a square foot in June.
The pandemic has slowed office construction but hasn’t halted it. CommercialEdge said that 161 million square feet of office space is now under construction across the top 50 U.S. markets. The company also reported that developers have completed nearly 30 million of the about 85 million total square feet of office space scheduled to be brought to market by the end of this year.
Office construction forecasts predict that 60 million square feet of new office property will be developed yearly in 2022 and 2023, followed by a gradual tapering off to roughly 25 million square feet that is estimated to come online in 2026.