Will companies bring more of their employees back to the office this March? Many seem poised to do this. But we’ve heard that before during this pandemic, only to see companies pull back on their return-to-office plans. It’s this uncertainty that is keeping the U.S. office market in limbo.
This is borne out in the February National Office Report from CommercialEdge. According to this report, the U.S. office market is still sluggish. In fact, CommercialEdge reports that the top 50 U.S. office markets averaged a vacancy rate of 15.7%. That is up 20 basis points compared to December of last year and 110 on a year-over-year basis.
Facing this uncertainty, developers aren’t building as many new office properties. According to CommercialEdge, 150.5 million square feet of new office stock was under construction by the end of January, a decline from normal activity in this sector.
Half of this new construction was located in urban submarkets, areas within city centers but outside their central business districts. A total of 31% was taking place in suburban submarkets and 19% in central business districts.
Glimmers of hope? CommercialEdge reported that nearly $5.9 billion in office transactions were completed through January, even with the delay in most employees returning to their offices. The national average sales price for office space hit $288 a square foot as of the beginning of 2022.
Leasing rates are rising, too, although slowly. According to the report, across the top 50 U.S. markets, the average listing rate for office space stood at $38.62 a square foot in January. That is up 1.2% on a year-over-year basis.