Despite WFH, Tech Still Led Office Leasing

Despite a dramatic slowdown in new leasing activity in the office sector and WFH becoming widespread, tech companies still accounted for most of the biggest US office leases last year despite holding a smaller share of office leasing than in 2019.

A new report from CBRE shows that tech accounted for 17% of all US office leasing last year by square footage, as opposed to 21% the previous year, but was still down 48% over 2019 levels to 26 million square feet. Office leasing by tech companies totaled 26 million square feet in 2020. Total office leasing in the U.S. declined by 36% year-over-year.

Seattle came in first for huge tech leases—up from No. 3 in 2019—with 14 of the top 100 deals. Manhattan remained in the No. 2 position with 8 leases totaling 1.8 million square feet, and Washington D.C. climbed to No. 3 from No. 6 thanks to 12 huge leases also totaling 1.8 million square feet. 

Atlanta, Austin, San Francisco, Boston, Chicago, San Diego, and Los Angeles rounded out the rest of the top 10 tech leasing markets.

Renewals accounted for 25% of cumulative square footage of big office leases by tech companies, up from 17.5% in 2019, and CBRE analysts say that growth reflects larger office trends as more companies choose to renew leases while they wait for the economic recovery to play out.

“The tech industry has been rapidly expanding its real estate footprint for much of the past five years, and many leases signed in that recent timeframe have yet to come up for renewal,” said Todd Husak, managing director of CBRE’s tech and media practice group. “Therefore, renewals still aren’t as prevalent as new leasing for tech companies.”

Tech companies have also put record amounts of sublease space up for grabs, with Salesforce in San Francisco being the most prominent example. San Francisco recorded a record uptick in sublease supply in 2020, accounting for more than half of the total office vacancy there, according to Cushman & Wakefield research.

Despite that glut of space, however, some investors are bullish on the sector.

“Office buildings are not going away any time soon,” Giovanni Cordoves, Western regional president of KBS, told GlobeSt.com earlier this month. “As long as workers have a need for community and employers strive for ingenuity and collaboration, there will be a demand for office space. Additionally, as the COVID-19 vaccine becomes more widely available and people feel safe and comfortable, well-amenitized office properties will once again be in high demand.”