Office Vacancies Show First Post-Pandemic Annual Decline
According to CBRE’s Stefan Weiss, average asking office rents, adjusted for inflation, remain at their lowest level since the late 1980s despite rising slightly. The vacancy rate, although still above the long-term average of 12% to 14%, shows improvement, signaling a potential recovery from the pandemic-driven slump caused by remote and hybrid work trends.
Rent Trends Reflect Market Changes
Office rents, excluding concessions, increased by 1.7% year-over-year to $32.47 per square foot annually in Q3, up from $31.92. Nevertheless, inflation-adjusted asking rents remain near the lowest point since around 1988.
Market Dynamics Favor Tenants Outside Prime Spaces
“Users of prime space are seeing the market is tighter but it’s still a tenant-favorable market for anything outside of that prime product,” Weiss said.
Although most corporate costs are rising faster than rents, the market continues to benefit tenants, especially in non-premium office buildings.
Signs of Stabilizing Demand
Demand is showing some stabilization, partly driven by efforts to bring employees back to the office. Financial services and technology firms are increasing their need for larger office spaces.
Two years ago, office space per employee reached a low of 146 square feet, but that figure has slightly increased to 149 square feet, Weiss noted.
Summary: Office vacancies are improving and rents are rising modestly, but inflation-adjusted rents remain near their lowest levels since the late 1980s, reflecting a tenant-favorable market outside premium spaces.