The Industry-Specific Trends of Office Leasing Demand

The future of the office market rests in a single question: will employees return to the office. If you review the current leasing trends, the answer is unclear. Tech, life science and health care industries are driving office lease activity, and many are expanding their footprint. Other industries, however, are going in the opposite direction and downsizing.

Scott Nelson, CEO of occupier services at Colliers, spoke to GlobeSt.com exclusively about the trend. Nelson saw an increase in office demand at the end of 2021, but he said the activity came alongside some notable downsizing activity. “We saw demand more from high-growth industry sectors and small- to mid-sized businesses, but we also saw quite a few big office space users across many industries, including professional services, that are reducing space,” he told GlobeSt.com. “You are seeing both.”

The trends are industry specific. While tech, life science and healthcare are growing, more traditional office users, particularly financial services firms, are shrinking their office footprint. “It is really dependent on the profile of the business. In major cities, tech users are doubling down,” says Nelson. “Facebook and Google in New York; Oracle in Austin and Nashville; Google in Atlanta. Big professional services firms like Deloitte, PWC, EY, which are some of the biggest occupiers of office space, are looking at downsizing in major urban cores and providing more flexibility for their people.”

While rightsizing has been reserved to the major metros, where most of these major office-using firms are headquartered, both big cities and secondary markets are seeing renewed leasing demand among occupiers in expansion mode. “The mega-cities around the US did see some significant leasing activity and increase in occupier demand,” says Nelson. “And, it wasn’t only the mega-cities, but high-growth markets like Raleigh, Austin, Nashville and Tampa, also saw a lot of activity. Those markets are attractive namely from a labor force perspective.”

For companies downsizing, many are relaying more on suburban locations. “They aren’t opening new suburban locations, because they are seeing a reduction in the amount of space that they need going forward, but they are making sure that their workplaces in suburban markets can accommodate the new way of work,” explains Nelson.

Looking ahead, Nelson says that there remains a lot of uncertainty about the workplace structure and the amount of space that companies will need. His advice is to utilize data. “We are advising all clients to make sure that they have tools in place to get data on how the space is being used, and to be in a position to analyze data and develop strategies with that data,” he says. “That is the real focus.”