Office Tenants to Reduce Space This Year By Nominal Amount

Office occupiers expect to shrink their footprints by just under 3% on average in 2024, according to a current survey done in partnership with Corenet Global and Cushman & Wakefield.

This magnitude of tenant downsizing, countered by new entrants to the leasing market, lines up with Cushman & Wakefield’s US Macro Outlook, published in December.

“Our base case scenario calls for an increase of vacancy of approximately 160 basis points this year before national vacancy declines in 2025,” David Smith, head of Americas Insights, Cushman & Wakefield, said in a recent company news video.

Smith said that the nominal decline (2.9%) in office space occupancy is actually good news.

“It points to the fact that most of the impacts of increased hybrid and remote work have worked their way through the system, meaning that when economic uncertainty fades and office growth picks up again, we can expect occupancy to stabilize and absorption to then turn positive,” Smith said. “In fact, we’re already seeing some positive glimpses in the data.”

In 2023, Cushman & Wakefield found that 44% of renewals over 15,000 square feet were expansions. That is, occupiers renewed in place and increased their square footage in the building. Another third of renewals were completed with the exact same amount of space.

This leaves less than one-fourth of office renewals that were signed for less space this past year, according to the firm.

In 2024, Smith said there’s still some office portfolio right-sizing to be done on the margins.

“But look for occupiers to expand their workplace needs when office-using employment picks up again,” he said.