Office Occupancy, Rents Rose In Majority Of US Metros

Office occupancy rose in 84% of the 390 US metro areas tracked by Costar in the first quarter, led by Boston, and office asking rents are also rising in 98% of those markets, according to the National Association of Realtors. 

Boston had the highest net absorption over the last 12 months, at 3.75 million square feet. Occupancy is increasing in major tech metros, led by San Jose (3.5 msf), San Diego (1.6 msf), San Francisco (0.75 msf), and Seattle (0.28 msf).

“The rising occupancy in these tech metro areas indicates that tech companies are contributing to the demand for office space, even as nationally, 45% of mathematical and computer workers work from home for at least some part of the time,” says Scholastica Gay Cororaton of the National Association of Realtors.

The strongest markets for occupiers tend to be in the South and West, led by Austin (3.37 msf), Dallas (3.36 msf), San Jose (3.1 msf), Atlanta (2.6 msf), and Houston (2.1 msf).

Rents also rose in 98% of the 390 cities, with the exception of cities like New York (-0.9%), San Francisco (-1.8%), and Washington, D.C. (-0.4%).

“Nationally, office asking rents are up just 0.7%, but that is because the major metro markets are weighing down the average rent growth and masking the strong rent growth across other markets,” Cororaton says, noting that among the top five metro areas with a population of at least 1 million with the highest asking rent growth, asking rents are up at 4% or more in the Palm Beach metro area (6.2%), Providence (5%), Miami (4.9%), Las Vegas (4.3%), and Tucson (4.1%).

But despite that good news, about 110 million square feet of office space is still vacant, and it will take 11 quarters to reabsorb that space. Cororaton also predicts that asking rents are likely to grow at a “modest” pace (1% to 2%) in 2022 through 2024.

New demand for office space in January was flat over December figures, remaining at 58% of its pre-pandemic level.