Office Vacancies Show First Post-Pandemic Annual Decline
According to CBRE’s Stefan Weiss, average asking office rents—adjusted for inflation—remain at their lowest level since the late 1980s, despite recent increases. The vacancy rate, though still above the long-term average of 12% to 14%, is improving, signaling a possible turnaround in the office market slump caused by the rise of remote and hybrid work during the pandemic.
Rents exclusive of concessions rose by 1.7% year-over-year in Q3, reaching $32.47 per square foot compared to $31.92 previously. However, on an inflation-adjusted basis, asking rents are at their lowest point since approximately 1988, according to Weiss.
“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,” Weiss said.
Most corporate costs are increasing faster than rents, which maintains a tenant-friendly environment especially outside top-tier properties. Demand appears to be stabilizing, supported by the return-to-office movement and increased space needs from financial services and tech companies.
Two years ago, the average office space per employee bottomed out at 146 square feet; it has since risen slightly to 149 square feet, reflecting changing space utilization trends.
Author's summary: Office vacancy rates are improving and rents modestly increasing, yet inflation-adjusted rents remain near historic lows, sustaining a tenant-favorable market amid evolving workspace demands.