According to a recent analysis of the office market by CoStar Group, there was an increase in leasing transactions, but an overall decline in volume, driven mostly by shrinking lease sizes as tenants search for quality over quantity.
CoStar calculated the sector’s biggest quarterly jump in two years as tenants sought out smaller spaces, with square footage signed projected to total 98.5 million in the second quarter, some 13% below the quarterly averages seen from 2015-2019.
The average lease signed in the second quarter was about 3,250 square feet, down from an average of roughly 4,050 square feet between 2015 and 2019 – or a drop of 20% below its pre-pandemic norms.
As one example, Charles Schwab is among the firms shrinking their office footprint.
At the same time, subleasing has been increasing through the first half of this year, after many felt that trend had peaked about two years ago, Costar said.
It also observed that widespread availability of high-quality sublet space could tip tenant preference in its favor: In the 13 quarters since the pandemic started, office tenants have moved into 50 million square feet of five-star space leased directly from landlords, about a third less than the amount leased and occupied in the prior 13 quarters.
“While five star sublet availability has historically remained lower than four star, the two categories have intersected at 4.4%,” CoStar reported.