Offices in central business districts are facing a "structural downshift" as more and more floorpans in cities' urban downtowns come up for lease.
"While briefly positive in the second half of 2021, omicron-induced delays to workplace return plans set net absorption back on a negative path this year," Marcus & Millichap analysts note in a new report on the state of the office sector. "After more than two years of waiting, some companies are finally executing on lease terminations. This is especially true of mid- and low-tier space in the nation's largest central business districts."
Vacancies in the CBDs of primary metros climbed 550 basis points between the end of 2019 and June 2021 and have since advanced more slowly, up 30 basis points to 18.6 percent. In secondary metros, vacancy has declined 30 basis points and rents have grown by 2.9 percent.
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