Commercial Real Estate News
Omicron Stalls Multiple U.S. Office Markets' Recoveries in December
According to CBRE's latest monthly "Pulse of U.S. Office Demand" report, the recovery of several Top U.S. office markets took a pause in December amid uncertainty caused by the omicron variant of COVID-19.
Activity by companies looking for office space in December was flat with a month earlier, while that of companies completing new leases was down moderately, according to CBRE's indices. Meanwhile, sublease availability improved slightly, though it remains elevated.
"Omicron has disrupted many economic and social aspects of our return to normalcy, so it is to be expected that office leasing would be affected, too," said Nicole LaRusso, CBRE Director of Research & Analysis and lead author of the report. "This is temporary. Demand for office space will likely resume its recovery early this year as omicron recedes and companies get back to moving forward with their long-term plans for their offices."
To gauge the pace of recovery, CBRE's monthly report tracks the three leading indicators of office market activity in the top 12 U.S. office markets: tenants-in-the-market (TIM), which quantifies the amount of office space that companies are actively seeking; leasing activity in the form of finalized lease agreements; and the availability of sublease space.
A national view of the indices reveals the progress of the office market's recovery. For each index, a reading of 100 equates to the pre-pandemic levels of 2018 and 2019.
Overall, Boston leads the recovery among the 12 markets, with December TIM activity 18 percent higher than pre-crisis levels and leasing activity nearly double that benchmark. Next highest on the recovery gauge are Dallas-Fort Worth and Los Angeles, both boosted by robust leasing activity. Also making gains in their recovery were Atlanta and Houston, both of which pared their sublease availability.
The U.S. TIM Index held steady at 86 in December, just shy of its peak from June and July (87). Seven of the 12 markets notched a modest decline in their TIM-index readings. Houston (118), Boston (118) and Dallas-Fort Worth (106) were the only three to exceed pre-pandemic activity levels in December.
The Leasing Activity Index fell by 10 points in December to 95. Eight of the 12 markets registered leasing activity relatively flat in comparison to a month earlier. Still, five registered leasing activities exceeded pre-pandemic levels: Boston (192), Los Angeles (135), Seattle (115), Dallas-Fort Worth (106) and Atlanta (105). Another, Manhattan (100) matched its pre-pandemic level of activity.
The Sublease Availability Index improved in December, though it remains the market's biggest challenge. The index declined by four points in December to 193, which indicates positive momentum in that the amount of space offered for sublease shrank slightly. However, the index still is roughly double its pre-pandemic level. Nine of the 12 markets notched declines in December, with the most improvement occurring in Houston, Los Angeles and Atlanta.
