Class A Office: More Available and More Expensive

Due to a continued active development pipeline Class A availability is now higher than that of Class B and C, according to a new US Office report from Savills.

Tenants are seeking best-in-class locations and amenities, creating a significant bifurcation in pricing with Class A properties asking 25% more on average.

The “flight to quality” and active construction pipelines have contributed to keeping Class A rents stable – and increasing at the very top of the market, Savills said.

The top inventory growth markets are Austin, San Diego, and Nashville.

Availability overall remains elevated across US markets as sublease space swells to historic highs and landlord concessions are at a peak in many markets.

San Jose and San Francisco are the markets offering the most sublease space.

Central business district (CBD) availability is currently at 24.7%, up 1,000 bps from pre-pandemic as dense urban centers remain heavily impacted. CBDs have not yet seen drastic repricing of asking rents with many owners taking a “wait-and-see” approach amidst uncertainty, the report suggests.

Suburban availability is now up 24.4%, a 530 bps increase from pre-pandemic levels.

“It will take time and sustained leasing activity to substantially offset the amount of space returned to the market since the onset of the pandemic,” according to Savills.

“Growing bifurcation in many markets where pricing is high (and space is limited) for top-tier buildings, while older, more dated space is sitting on the market for longer.”