The most recent VTS Green Shoots report for the office sector was tepid, coming on the heels of two significant rate hikes by the Fed and eye-popping increases in the consumer price index. 

The national VTS Office Demand Index was 63 in June after remaining stable for several quarters, with tenant demand 6% higher year to date, year over year. But "VODI's point drop from 68 in June put the change of new tenant requirements into the red (-3%) YTD over 2021 YTD through June," the report notes. "Down significantly from pre-Covid averages, this month's downtick in VODI demand puts the spotlight on the recent macro decline and calls into question the near-term direction of tenant demand."

Demand was higher with strong net effective rent growth in Q2 in markets where employees are back in physical offices (like Houston, New York Los Angeles, and Chicago), with demand in those cities down just 24% over pre-COVID numbers and outperforming market where workers are still working from home more often than not (think Washington D.C., San Francisco Seattle, and Boston).