Office Demand Stabilizing at About Half of Pre-Pandemic Levels
Los Angeles is among the outperformers and Seattle slips to historic lows.
After oscillating between half and two-thirds of what it was before the pandemic, office space demand has stabilized and will remain at current levels for the foreseeable future, according to VTS’ latest report.
Noteworthy in its market report is that Los Angeles is thriving, and Seattle has slipped to historic lows.
The VODI tracks unique new tenant tour requirements of office properties in core US markets and is an early available indicator of upcoming office leasing activity.
The national VODI sits at 51 – or just half of the pre-pandemic levels. The current level is two VODI points lower than one quarter ago and three VODI points higher than a year ago. A VODI of 100 is considered normal based on historical norms.
“Although it is showing signs of life amid persistent headwinds, it remains to be seen if the office market will continue to rebound further from pandemic lows, VTS CEO Nick Romito says in prepared remarks. “What the office market has experienced over the past two years is likely what we will see in the immediate future.
“Amidst a cooling job market, new demand for office space has remained fairly consistent over the last two years despite these headwinds, which is a positive indicator of resiliency.”
Ryan Masiello, Chief Strategy Officer of VTS, called out Seattle’s very low demand for office space.
“It’s more reminiscent of the beginning of the pandemic than any other time, and it doesn’t appear to be changing soon,” he said.
“The last and only other time we saw an absence of tenants seeking large spaces was during the beginning of the pandemic lockdown. Given that the Seattle area is densely populated with tech sector jobs that are amenable to working from home, it will likely take some of the big area employers pushing harder for return-to-office, such as Microsoft and Amazon, to reverse this trend.”
Meanwhile, the report found that in Los Angeles, there’s been a spike in tenants seeking large spaces greater than 50,000 square feet.
“New demand for spaces of that size in Los Angeles is now higher than at any time since June 2021,” according to VTS.