Commercial Real Estate News
January Marks Second Consecutive Month U.S. Office Leasing Remains Tepid
Only Denver and Seattle saw gains in office leasing activity in early 2022
According to CBRE's latest monthly "Pulse of U.S. Office Demand" report, the recovery of several large U.S. office markets extended its pause in January 2022 amid uncertainty caused by the omicron variant of COVID-19.
Office leasing activity has stayed cautious since omicron flared up in late November. Still, leasing activity tracked by CBRE's Pulse report remains somewhat close to pre-pandemic levels. Meanwhile, sublease availability increased slightly, still measuring nearly twice its pre-pandemic level.
"Despite this temporary slowdown in lease signings in December and January, the more forward-looking indicator - the increase in companies in the market searching for new office space - bodes well for the office-market recovery soon regaining momentum," said Nicole LaRusso, CBRE Director of Research & Analysis and lead author of the report.
To gauge the pace of recovery, CBRE's monthly report tracks the three leading indicators of office market activity in the largest 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 outlines the scope and trajectory of the office market's recovery. For each index, a reading of 100 equates to the pre-pandemic levels of 2018 and 2019.
Boston leads the recovery among the 12 markets, buoyed by strong leasing activity by life-sciences companies even though the market's momentum cooled a bit in January. Also making progress in January were Dallas-Fort Worth, Denver, Los Angeles and Seattle.
The U.S. TIM Index increased by three points to 89 in January. Six of the 12 markets notched increases in their TIM-index readings. Houston (121), Boston (117) and Denver (105) were the only three to exceed pre-pandemic activity levels in January. But four others are close to regaining their 2018-2019 level: Dallas-Fort Worth (96), Chicago (91), Seattle (91) and Manhattan (90).
The Leasing Activity Index fell by eight points in January to 89, likely due to concerns about omicron. Only two of the 12 markets - Denver and Seattle - posted gains in their leasing activity indices in January 2022. Still, those and three others - Boston, Los Angeles and Dallas-Fort Worth - registered leasing activity exceeding pre-pandemic levels.
The Sublease Availability Index rose by two points in January to 195, indicating that the sublease situation got slightly worse. For January, the increase reflected a slowdown in lease-up of space offered for sublease rather than an increase in supply. The sublease index is roughly double its pre-pandemic level. Four markets registered declines in their sublease indices in January: Boston, Chicago, Seattle and San Francisco
