Q4 2024 Occupier Outlook - Office

Office Recovery is in Sight

Office occupancy remains volatile, but a broader picture of the office market is becoming clearer as it appears the bottom may be at hand. Recovery will likely be measured in years as more than 260 million square feet has accumulated since the start of the pandemic. With new supply coming to a virtual halt and older supply being removed and/or converted, vacancy is expected to slow. Meanwhile, availability is retreating as sublease space has started to shrink as occupiers take space off the market. The recovery is specific to markets, as New York has seen positive demand, while other gateway cities are still shedding occupancy as knowledge worker job growth has slowed. Still, top-tier, first-generation availability is growing scarce and remains a bright spot for some landlords, limiting some options for tenants looking for well-appointed space.

Office Tenant View

  • Executed leases accelerated in 2024, but deal sizer are 10 to 20 percent lower compared to pre-pandemic levels.
  • New office starts are at a historic low and with high borrowing costs and murky demand, the pipeline will remain tepid for 3 to 5 years out.
  • Tenants who right-sized office footprints will be considering future space plans as anticipated fiscal stimulus of extended tax cuts could lead to a near-term surge in hiring and reverse the recent stagnation of knowledge-oriented job growth.
     
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