US office market recovery slowed in February, leasing activity declines

According to the latest CBRE Monthly U.S. Office Demand Pulse ReportThe recovery in the US office market slowed for the second consecutive month in February, although the number of companies actively seeking new space indicates that leasing activity could pick up in the coming months.

Office leasing activity slowed markedly in February as companies delayed decisions on long-term commitments, likely in part due to the omicron variant of COVID-19. Meanwhile, two other metrics have remained stable: sublease availability has remained at almost half of its pre-crisis amount and business activity seeking new space has remained at an encouraging level. .

“Uncertainty in the market due to the pandemic, inflation or geopolitical events can have a cooling effect on office market activity,” said Julie Whelan, global head of occupier research at CBRE. “There is reason to be optimistic, however, that the sustained level of activity from companies seeking new office space will translate into increased rental activity in the months ahead.”

To gauge the pace of recovery, CBRE’s monthly report tracks three main indicators of office market activity in the 12 largest U.S. office markets: Tenants in Market (TIM), which quantifies the amount of office space that companies are actively seeking; rental activity in the form of finalized rental contracts; and the availability of sublet space.

A national view of the indexes outlines the scope and trajectory of the office market recovery. For each index, a reading of 100 is equivalent to the pre-pandemic levels of 2018 and 2019.

February results for all three CBRE indices again show Boston leading the recovery among 12 markets, due to its strong TIM activity. The list of other markets showing progress in February offered little change from the previous month; Dallas-Fort Worth, Los Angeles, Denver and Seattle led the rest in recovery.

The US TIM index recorded 89 in February, unchanged from the previous month. Three markets have TIM readings above their pre-crisis levels: Houston (126), Boston (118) and Dallas-Fort Worth (116). Three others are within 10 points of reaching their pre-crisis levels: Manhattan (99), Denver (96) and Seattle (92). Of those six markets, only Denver saw a drop in its TIM reading in February.

The rental activity index fell 18 points in February to 76, reflecting lower activity in 10 of 12 markets. The other two – Dallas-Fort Worth (93) and San Francisco (40) – remained unchanged from the previous month.

The Sublease Availability Index remained unchanged in February at 196. It has been hovering around this level since September 2021. Nine of the 12 markets posted an increase in their sublease indices in February, although the increases were been minimal for the most part. Only one market – Houston (90) – shows a sublease value below its pre-crisis level.

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Jose C. Birney