As companies struggle to deal with changing work models in the office market, a report by CommercialEdge shows the number and popularity of coworking spaces are growing. “Coworking has provided an alternative to the rigidity of both in-office and remote-work models,” it noted. “Coworking as a percent of total office space has increased to 2.0%, up 30 basis points year-over-year.”
Data for February 2025 showed a 25% annual increase in coworking locations to 7,814 nationwide. There was also a 15.2% rise to 140.1 million square feet in the amount of space leased. However, the average size of coworking locations decreased 1,524 square feet to 17,932 – a trend the report predicted will continue as coworking shifts from central business districts to the suburbs.
Currently, the South (33.3 million square feet) has the greatest amount of coworking surface, followed by the West (31.8 million), the Northeast (31.7 million), and the Midwest (21.7 million), which also saw the highest increase in both locations and square footage.
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Vacancy continues to be a problem for the office sector as a whole. The national rate remained unchanged at 19.7% in February compared to January but rose 180 basis points year over year. The highest vacancy was recorded in San Francisco (27.8%), Austin (27.4%, up 530 basis points) and Dallas (23.8%). The vacancy rate in Boston climbed 490 basis points over the year to 17.1% due to new supply and a cooling life sciences sector.
In general, the report found that rising vacancies, economic uncertainty, and remote work had all but dried up the appetite to build new office space. Deliveries in 2024 hit a new low, and 2025 is expected to be even lower. Houston was the main exception, with more than 1 million square feet of office starts in 2024, mostly away from the CBD and in outlying areas. The pipeline under construction in Dallas-Fort Worth almost halved from 5.14 million square feet in February 2024 to 2.88 million this year.
In the first two months of the year, the U.S. achieved $7 billion in office sales at an average $177 per square foot. Manhattan led the nation with $1.8 billion in sales at $450 per square foot – up from $77 million in the previous year.
It was followed by Chicago, with $561 million in sales – scoring in two months one third of its 2024 total. However, many sales were at significant loss, like 200 South Wacker, which sold for $68 million in January compared to its 2013 price of $214.5 million. Other markets in the top five for sales were the Bay Area ($467 million), New Jersey ($409 million) and Los Angeles ($334 million). Nearly half of Western office markets had sale prices above the national average.
Midwestern markets ranked among the most affordable in the nation for office investment. In the South, only Miami and Tampa succeeded in selling properties above the national average price, with Nashville among the lowest.
The national listing rate in February was $33.41, up 6% over the year. In the West, San Francisco led with rents averaging $63.63 per square foot. Portland was the most affordable market in the region with rents of $28.10 per square foot – below the national average. Western office markets continued to record some of the highest vacancy rates in the nation, the report stated.
In the Midwest, only Minneapolis-St. Paul showed a slight annual rent increase. However, the metro, along with Chicago and Detroit posted the lowest rents among major U.S. markets. In the South, Miami (55.38 per square foot), Austin ($45.90), Washington, DC ($40.46), and Charlotte ($34.07) were the only metros to score rents above the national average. Orlando offered the lowest in-place rents at $28.26 per square foot.
In the Northeast, only Philadelphia had rents below the national average. Other northeastern markets remained among the most expensive in the nation, led by Manhattan at $68.93 per square foot.
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