Demand For US Office Space Down 1.5% In April
USA – The VTS Office Demand Index (VODI) showed that take-up of office space across the country dipped by 1.5 percent month-on-month in April 2022, according to a press release published on Business Wire on Wednesday afternoon (25 May, SGT).
However, the marginal drop is a departure from the seasonal norm, in which there is typically rising demand for office space during the month of April. Demand for such workspace now stands at two-thirds of the normal, based on the index.
Although it underperformed nationally by 5.1 percentage points in April 2022 compared to the average increase seen in April 2019, new demand for office space is still up 12.1 percent quarter-on-quarter. However, the VODI is down year-on-year, mainly due to an abnormal surge in pent-up demand in April 2021 caused by a post-vaccine push to return to the office that was delayed during the earlier phases of the pandemic.
“We’ve moved away from COVID-19 being the single driving force impacting demand for office space, to broader economic variables driving decisions,” said Nick Romito, CEO of VTS.
“Looming economic concerns may have some employers sitting on the sidelines until there is more certainty on the horizon,” he added.
Moreover, data from VTS showed that the gap in demand for office space between more remote work-friendly office markets and less remote work-friendly office markets continued in April.
On average, the less remote work-friendly office markets of New York City, Chicago, and Los Angeles performed 25.3 percent better than the more remote friendly office markets of San Francisco, Boston, Seattle, and Washington, D.C.
Before the virus outbreak the two groups of office markets, most commonly had a monthly difference in single digits. But in September 2020, the disparity rose sharply to over 30 percent, and the more remote-friendly office markets fell largely behind.
“It is quite remarkable how clear the line is between cities that have a large share of remote-friendly jobs relative to those with a smaller share,” said VTS Chief Strategy Officer Ryan Masiello.
“To continue to recover, the core office markets with higher rates of remote-friendly tenants will need to attract more diverse tenants and be willing to adapt their spaces to meet the needs of tenants who are not planning for their employees to come back into the office full time,” he added.
The VODI tracks unique new tenant tour requirements, both in-person and virtual, of office properties in core US office markets. It is also the earliest available indicator of upcoming office rental activity as well as the only commercial property index to explicitly track new tenant demand.