Demand for US Office Markets Remained Stable In November

Despite intensifying uncertainty around the Omicron variant, demand for US office markets were stable in November, with metrics showing minimal changes from the prior months’ recovery. 

“It’s rare that a draw can be considered a win, but that is the case with November office-leasing activity in these top 12 markets,” said Nicole LaRusso, CBRE Director of Research & Analysis and lead author of the firm’s monthly Pulse of US Office Demand report. “Uncertainty typically hampers leasing activity. But, with two of our indices showing only tiny losses and the third holding steady, it appears that companies remain focused on their long-term needs for office space.”   CBRE’s monthly report tracks three leading indicators of office market activity in the top 12 US office markets: tenants-in-the-market (TIM); leasing activity (as expressed through finalized lease agreements); and the availability of sublease space.

Boston once again nabbed the top spot among the 12 markets CBRE tracks, with tenants-in-the-market activity 23% higher than pre-COVID levels. Leasing activity in the region is more than twice pre-crisis numbers. 

Dallas-Fort Worth followed behind at #2, while other November leaders for overall activity included Los Angeles, Manhattan and Washington, D.C.

   CBRE’s Tenants-in-the-Market (TIM) Index remained steady 85 in November, a number that’s on par with the summer peak. And half of the 12 markets CBRE tracks now have TIM-index readings of more than 90, “meaning they’re either fully recovered to pre-crisis levels or close to it,” LaRusso  says. 

 The Leasing Activity Index fell by two points in November to 100, with six markets notching major gains, led by Los Angeles with a 21-point increase.   The biggest challenge to the office market nationally remains sublease availability: that index increased by one point to 197 in November. Sublease indices decreased in four markets: San Francisco, Manhattan, Denver, and Boston.

“The sublease overhang still is nearly double its pre-crisis level,” LaRusso notes.  But despite that, “demand for office space will likely continue to improve as more workers return to the office and occupiers take advantage of favorable market conditions,” she says. “The outlook depends on how omicron, and likely other new COVID variants, impact society. With the rollout of vaccine boosters and effective medical advancements, occupiers should gain confidence in making long-term leasing decisions.”