Office Vacancies Show First Post-Pandemic Annual Decline
According to CBRE’s Stefan Weiss, average asking office rents, when adjusted for inflation, remain at their lowest level since the late 1980s. Though vacancy rates are healthier, they still exceed the long-term average of 12% to 14%, signaling a gradual recovery from the pandemic-driven slump caused by the rise of remote and hybrid work.
Rising Rents Reflect Market Shift
Office rents excluding concessions increased by 1.7% year-over-year, reaching $32.47 per square foot annually in Q3, up from $31.92. Despite this increase, inflation-adjusted rents remain historically low, Weiss noted.
Tenant-Favored Market Persists Outside Prime Buildings
While corporate expenses are increasing faster than rent growth, the market still largely benefits tenants, particularly outside prime office spaces. Weiss stated:
“Users of prime space are seeing the market is tighter but it’s still a tenant-favorable market for anything outside of that prime product.”
Signs of Stabilizing Demand
Demand seems to be stabilizing, supported by the return-to-office movement and increased space requirements from financial services and technology companies. The amount of office space per employee hit a low of 146 square feet two years ago and has since increased slightly to 149 square feet.
Overall, these trends suggest that the office market is beginning to recover, with rents slowly climbing and demand stabilizing against a tenant-favorable backdrop.
Summary: Office vacancies show slight improvement post-pandemic, with modest rent growth and early signs of demand stabilization led by return-to-office efforts and expanding space needs in tech and finance sectors.