US Office Leasing Rebounds 50% From Pandemic Bottom
USA – Data from Jones Lang LaSalle (JLL) shows office leasing activity across the country surged by 50 percent from its lowest point during the COVID-19 pandemic in 2020, reported GlobeSt on Wednesday evening (12 January, SGT).
However, overall office leasing volume remains 34 percent below pre-pandemic levels. In Q4 2021, office leasing volume only reached slightly under 40 million sq ft compared to roughly 59 million sq ft, which is the pre-COVID average quarterly leasing volume since 2016.
Nonetheless, the US office market saw 3 straight quarters of office leasing volume gains, led by 5 big tech firms that have boosted their office footprint by a combined 9 million sq ft since the start of the virus outbreak.
In particular, office markets in America’s Sun Belt continue to outperform gateway cities. In fact, there was a 30 percent gap in office leasing activity between Sun Belt cities and other big office markets
Sun Belt cities have benefited from rising office leasing activity as companies embrace the hub-and-spoke models, explained JLL, adding that lower cost-of-living and availability of manpower are now key considerations for tenant office site selection plans.
Although gateway cities continue to face weak demand, JLL expects gateway cities will likely “reaffirm their position as talent magnets in 2022”.
Colliers CEO Gil Borok agrees. He told CNBC that Grade A office properties and trophy office buildings in cities like New York City are retaining value and have remained resilient despite a perceived flight to suburban office markets.
“Perhaps that’s bold, because it’s really not a clear pathway at the moment. Every time it clears it seems to cloud, he said referring to the COVID-19 pandemic impact on the office market.
“But I think investors are taking, just like in the stock market, a long- term view. We will eventually beat this pandemic and once we do then those offices have value. They may be used a little differently than they were… but nevertheless they have value.”
Furthermore, JLL witnessed a flight to quality office buildings as occupants look for amenity-rich buildings to lure their staff to return to their workplace. The property consultancy estimates that there’s a 12 percent performance gap between Grade A office space and lower quality workspace.
“The office market is oversupplied with commodity office space. Landlords should differentiate their assets by investing in in-demand amenities, such as outdoor spaces, food & beverage offerings, hospitality services and tenant lounges,” added JLL analysts.