The tech and life sciences sectors are the main drivers of office investment and development, according to the latest Yardi Matrix report.

Report Highlights

• Transaction volume reached just under $57 billion through the year’s first eight months
• The average full-service equivalent listing rate was $38.70 per square foot in August, a 10-basis-point decrease from the same period last year.

• Office vacancy continued its downward trajectory, averaging 14.8 percent across the top 50 U.S. office markets.
• The under-construction pipeline included 139.9 million square feet of office space at the end of August.

Office transaction volume totaled $56.9 billion at the end of August, with office assets trading at an average of $258 per square foot. Investment activity year-to-date in August was highest in Dallas ($3.5 billion), Boston ($3.3 billion), Manhattan ($3.3 billion) and Washington, D.C. ($3.2 billion). Meanwhile, office buildings commanded the highest sale price per square foot in markets filled with trophy buildings, such as Manhattan ($901 per square foot) and San Francisco ($881).  

Some 139.9 million square feet of office space was under construction across the nation at the end of August, representing 2.2 percent of total stock. Going forward, Yardi Matrix will report differently on new office development, and reports will account for the amount of rentable office space within a property. With this in mind, 128 million square feet of rentable space was under construction as of August, with the bulk concentrated in tech-centric and life science hubs such as Manhattan (19.5 million), Boston (12.5 million) and Austin (8.8 million).

New supply drives up listing rates

National average full-service equivalent listing rates clocked in at $38.70 per square foot in August, decreasing by 10 basis points from the same period last year. The largest gains year-over-year in August were recorded in markets benefitting from a large active pipeline, such as Boston (17.7 percent year-over-year increase), Charlotte (16.2 percent increase) and San Diego (11.8 percent increase).

The new stock which is being added to these markets’ office inventory has been driving up average rates, reflecting the product listed rather than changes in market fundamentals. Meanwhile, listing rates continued to be elevated in gateway markets such as Manhattan ($81.22 per square foot), San Francisco ($66.52 per square foot) and the Bay Area ($53.74 per square foot). Meanwhile, office vacancy nationwide stood at 14.8 percent in August, down 30 basis points compared to July and 10 basis points from the same period last year. 

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Office transactions totaled $51.9 billion year-to-date in July, with Boston, Manhattan and the Bay Area leading the way, the latest Yardi Matrix national office report shows.

Report Highlights

• Full-service equivalent listing rates clocked in at $37.55 per square foot in July, up 17 cents month-over-month.
• Office vacancy averaged 15.1 percent across the top 50 U.S. office markets, up 10 basis points from the same period last year.
• The under-construction pipeline included 149.5 million square feet of office space as of July.
• Office transaction volume nationwide totaled $51.9 billion at the end of July.

Office transaction volume year-to-date in July totaled $51.9 billion. Sales surpassed the $3 billion-mark in Boston ($3.3 billion), Manhattan ($3.2 billion), and the Bay Area ($3.1 billion), largely driven by a flurry of activity in the life sciences sector. Investors were bullish on other gateway markets such as Los Angeles ($2.5 billion) and Seattle ($2.3 billion).

Meanwhile, office assets changed hands at an average $265 per square foot at the end of July. Manhattan ($892 per square foot) and San Francisco ($905 per square foot) continue to command the highest price per square foot.

Life science sector fuels Boston development

Some 149.5 million square feet of office space was under construction across the nation at the end of July, accounting for 2.2 percent of total stock. Projects in planned stages account for an additional 6.5 percent. The largest active pipelines were found in Manhattan (20.9 million square feet) and Boston, thanks to multiple projects that broke ground pre-pandemic, as well as the market’s strong life sciences footprint.

Some 28.7 million square feet were completed nationwide between January and July, with approximately 42 percent rising in the suburbs. Yardi Matrix estimates this share will decline in the near future, as only 31 percent of the upcoming stock is located in suburban submarkets.

As of July, the average full-service equivalent listing rate was $37.75 per square foot, increasing by 17 cents from the previous month but down 230 basis points year-over-year. Office vacancy nationwide clocked in at 15.1 percent in July, up 10 basis points when compared to the same period last year.

Markets with a high concentration of fully in-person office workers—predominantly from the life sciences and financial sectors—such as Boston (240 basis points) and Charlotte (130 basis points) recorded some of the steepest declines in office vacancy.

Read the full Matrix Office National Report-August 2022

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Some 26.5 million square feet of new office space have broken ground year-to-date in June, according to the latest Yardi Matrix office report.

Report Highlights

• Direct asking office rents averaged $37.58 per square foot in June, down 260 basis points from the same period last year.
• Office vacancy was 15.2 percent across the top 50 U.S. office markets.
• The under-construction pipeline included 151.7 million square feet of office space at the end of June.
• Office transaction volume nationwide totaled $43.7 billion year-to-date in June, while the average price per square foot clocked in at $272 per square foot.

National average full-service equivalent listing rates were at $37.58 per square foot in June, down 260 basis points on a year-over-year basis. Office vacancy nationwide continued its recent downward trajectory, clocking in at 15.2 percent in June, down 20 basis points compared to May and up 20 basis points from the same period last year. Boasting a 9.6 percent office vacancy rate, Boston was the only gateway market with a vacancy below the 10 percent mark. The strong life sciences sector within the region positioned the market in front of Manhattan (13.9 percent vacancy), Los Angeles (13.1 percent) or Miami (12.9 percent).

Some 151.7 million square feet of office space was under construction across the nation at the end of June, accounting for 2.2 percent of total stock. Some of the largest pipelines were found in Manhattan (20.8 million square feet under construction) and Boston (12.6 million), while Austin (8.4 million square feet, 9.4 percent of existing stock), Nashville (4.4 million, 7.5 percent) and Miami (5.6 million, 7.4 percent) led construction activity on a percentage of stock basis.

Despite economic headwinds, 26.5 million square feet of new office space have broken ground year-to-date as of June. Space was distributed unevenly, and the top 10 markets for starts accounted for nearly two-thirds of the total, or 17.2 million square feet. Sun Belt markets such as Dallas (3.8 million square feet), Austin (2.7 million) and Charlotte (2.0 million) led the way in this sense, alongside life science markets including the Bay Area (2.3 million) and Boston (1.6 million).

Transactions hot in tech-centric markets

Office transaction volume in the first half of 2022 came in at $43.7 billion nationwide. Office assets changed hands at an average of $272 per square foot at the end of June, with San Francisco ($920), Manhattan ($880 per square foot), Seattle ($649) and the Bay Area ($511 per square foot) posting the highest average sale prices across the nation.

The share of sales volume in gateway markets decreased from 41.5 percent in 2018 to 32.0 percent in 2022. Investment activity was concentrated in non-gateway life science markets with a strong tech footprint such as the Bay Area ($2.6 billion), Seattle ($2.3 billion), Denver ($2.2 billion) and San Diego ($931 million). 

Read the full Matrix Office National Report-July 2022

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The average full-service equivalent listing rate increased by 19 cents from April, reaching $37.56 in May, the latest Yardi Matrix office report shows.

Report Highlights

• Direct asking office rents clocked in at $37.56 per square foot in May, increasing by 19 cents from April.
• Office vacancy averaged 15.4 percent across the top 50 U.S. office markets, unchanged from the same period last year.
• The under-construction pipeline included 151.2 million square feet of office space as of March.
• Office transaction volume nationwide totaled $35.3 billion at the end of May.

Some 151.2 million square feet of office space was under construction across the U.S. at the end of May, accounting for 2.2 percent of total stock. Projects in planned stages account for an additional 3.9 percent. The largest pipelines on a percentage of stock basis were in Sun Belt markets such as Austin (8.8 million square feet, 10 percent), Nashville (5 million square feet, 8 percent) and Miami (5.6 million square feet, 7.4 percent). 

National average full-service equivalent listing rates were $37.56 per square foot in May, increasing by 19 cents from the previous month and down 210 basis points year-over-year. The largest gains over the year in May were recorded in Charlotte ($33.08 per square foot, 14.3 percent year-over-year increase), Boston ($39.02, 9.8 percent) and Miami ($47.08, 8.8 percent).

Office vacancy nationwide clocked in at 15.4 percent in May, down 30 basis points compared to April and virtually unchanged from May 2021. Gateway markets such as San Francisco (380 basis points), Manhattan (370 basis points) and Chicago (290 basis points) continue to struggle, recording the highest increase in vacancies on a year-over-year basis.

Deal Volume Driven by a Few High-Volume Markets

Office transaction volume in the first five months of 2022 totaled $35.3 billion, with sales surpassing the two billion mark in Seattle ($2.2 billion) and Dallas ($2.1 billion). Investment activity was also high in Los Angeles ($1.9 billion), Boston ($1.9 billion), Dallas ($1.8 billion) and Denver ($1.8 billion).

Office assets changed hands at an average $274 per square foot at the end of May. Manhattan ($967 per square foot) and San Francisco ($931 per square foot) continue to rank first on Yardi Matrix’s list, largely due to their extended Class A inventory and amenitized office buildings.

Read the full Matrix Office National Report-June 2022

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Office tenants renewed 43.8% of expiring leases by square foot in April, down 11.1 percentage points from 54.9% in January 2019, according to CommercialEdge. Since 2019, office renewal rates nationally have ranged between 50% and 60%, averaging 54.8%.

Only six of Yardi’s top 25 markets saw a positive change in expiring lease renewals from April 2021 to April 2022, although individual metro renewals are much more variable than the national average. Most markets saw decreases in renewal rates compared to a year ago, with the most significant declines in the Twin Cities (only 9.5% of leases renewed), the Bay Area (14.4%) and Boston (20.1%), per CommercialEdge.

April’s weak renewal data is concerning, as the return to office that some employers expected has been more sluggish than anticipated. Office security firm Kastle Systems reports that office occupancy levels have stalled at 43% for two straight months, suggesting a plateau that could be the “new normal.”

To be sure, April represents only one month of data, and the numbers at the metro level in some cases involve a small sample size, so the data is more of a warning sign than a red flag. That said, there are signals that should concern office owners. More companies are embracing hybrid or remote work models, while employees at some firms are balking at returning to the office. Meanwhile, the country is facing another surge in COVID-19 infections that will create more delays in any return to normalcy.

In such an environment, companies are increasingly reducing their space or looking to more flexible leasing models. According to CommercialEdge, the national office vacancy rate has increased 260 basis points since the beginning of the pandemic, to 15.8% in April.

The increase in vacancy rates has been concentrated in larger gateway markets, although secondary tech markets have also been challenged. Among gateway markets, the biggest jump in vacancy rates from pre-pandemic levels has been in San Francisco (10.6 percentage points), Manhattan (6.4) and Chicago (6.0). Tech hub markets with the most change in vacancy rates since March 2020 include Seattle (7.0), Denver (5.6) and Atlanta (5.0).

One factor tempering the increase in vacancy rates is the gradual proportion of office lease expirations, which will remain steady for the next several years, reducing the risk of mass amounts of office space becoming vacant at the same time. Between 11% and 13% of office leases will expire annually over the next three years, according to CommercialEdge. This steady level of expirations provides a timeline for owners to plan for the future of the space.

The amount of space expiring in the next few years together with the increase in vacancy rates is a concern for the industry that must be closely monitored. The proliferation of hybrid work could mean many offices will be reconfigured to meet the new work experience, and it will likely generate an increase in the amount of office space converted for life science, multifamily and industrial use.

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Office investors continue to focus on high-quality assets predominantly in Manhattan, New Jersey and Los Angeles, the latest Yardi Matrix office report finds.

Report Highlights

• Direct asking office rents decreased slightly, averaging $37.37 per square foot in April, 2.5 percent lower from the same period last year.
• Office vacancy averaged 15.7 percent across the top 50 U.S. office markets, unchanged from the month prior.
• The under-construction pipeline included 148.2 million square feet of office space at the end of April.
• National office transaction volume totaled $26.7 billion at the end of April, surpassing last year’s volume.

National average full-service equivalent listing rates averaged $37.37 per square foot at the end of April, down 250 basis points when compared to the same period last year. Despite having some of the largest under construction pipelines in the country, some markets continued to post some of the highest office listing rates, including Charlotte ($32.29 per square foot in April, a 12.2 percent increase year-over-year) and Miami ($47.76 per square foot, a 10.9 percent increase).

Meanwhile, the national office vacancy rate continued its downward trajectory. It clocked in at 15.7 percent in April, decreasing by 20 basis points from the prior month.

Sun Belt development rages on

The active pipeline included 148.2 million square feet of office space under construction at the end of April—accounting for 2.2 percent of total stock­. The planned stock further pushes the rate to 6.0 percent of existing stock. Unsurprisingly, Austin continues to lead the way in terms of development activity: nearly 10.3 million square feet of office space was underway in the market as of April, accounting for 11.7 percent of total stock and nearly 7 percent of all office space underway at national level.

Office construction activity was also high in other Sun Belt markets including Nashville (5 million sq. ft., 8.6 percent of total stock), Miami (5.4 million sq. ft., 7.1 percent of stock) and Charlotte (2.8 million sq. ft., 3.6 percent of stock).

Transaction volume off to new record

Office transaction volume amounted to $26.7 billion year-to-date in April. Office assets traded at an average $277 per square foot at the end of April, with investors focusing on high-quality developments. Sales activity was highest in Manhattan, where $1.8 billion worth of office assets traded year-to-date in April at an astounding $949 per square foot. Right across the Hudson River, office sales totaled $1.5 billion over the same period of time.

Read the full Yardi Matrix office report

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Sun Belt markets rank at the top of the charts in terms of development activity and construction starts, according to the latest Yardi Matrix office report.

Report Highlights

• Direct asking office rents clocked in at $38.65 per square foot in March, increasing by three cents from February.
• Office vacancy averaged 15.9 percent across the top 50 U.S. office markets
• The under-construction pipeline continues to shrink and included 144.7 million square feet of office space as of March.
• Office transaction volume nationwide totaled $18.9 billion at the end of March, while the average price per square foot stood at $280.

National average full-service equivalent listing rates averaged $38.65 per square foot in March, increasing by three cents from the previous month and 260 basis points year-over-year. Office vacancy nationwide clocked in at 15.9 percent in March, up 20 basis points compared to February and 30 basis points from the same period last year. Gateway markets such as San Francisco (380 basis points), Manhattan (370 basis points) and Chicago (290 basis points) continue to struggle, recording the highest increase in vacancies on a year-over-year basis.

Office transaction volume in the first quarter of 2022 equaled to $18.9 billion, slightly less than the $22 billion in office sales recorded in the first quarter of 2021. Investment activity was concentrated in Seattle ($1.2 billion), closely followed by Dallas ($1.1 billion), while New Jersey, Houston, Bay Area and Manhattan surpassed the billion mark in office sales. Office assets traded at an average $280 per square foot at the end of March, with Manhattan ($921 per square foot), San Francisco ($776 per square foot) and Seattle ($596 per square foot) leading the way in this sense.

The Sun Belt’s hot & cool pipelines

Some 144.7 million square feet of office space was under construction across the nation at the end of March, accounting for 2.2 percent of total stock. Half of this figure was located in urban submarkets—defined by Yardi Matrix as within the city center limits but not located in the Commercial Business District.

Since the onset of the pandemic, Sun Belt markets experienced increased domestic and business in-migration which paved the way for new development. Nationwide, the largest pipelines on a percentage of stock basis were Austin’s (11.5 percent), followed by Nashville (8 percent) and Miami (7 percent). However, while construction activity picked up in some of these markets, others that were hot before the pandemic hit—such as Phoenix—are pointing to a cooldown.

Read the full Matrix Office National Report-April 2022

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Although the national average vacancy rate continued to struggle, asking rates were actually up year-over-year.

Report Highlights

• Direct asking office rents averaged $38.62 per square foot in February, 1.2 percent higher from the same period last year.
• Office vacancy averaged 15.7 percent across the top 50 U.S. office markets, unchanged from the month prior.
• The active pipeline included 146.6 million square feet of office space under construction at the end of February.
• National office transaction volume totaled $12 billion at the end of February.

Office vacancy reached 15.7 percent in February, representing a 70 basis-point increase on a year-over-year basis, but remained unchanged from January. Vacancy rates decreased considerably in markets benefitting from domestic and business in-migration, such as Phoenix (down 280 basis points from February 2021) and Miami (down 270 basis points).

National office asking rates averaged $38.62 per square foot in February, accounting for a 120 basis-point increase year-over-year. The largest upticks in listing rates were present in Los Angeles (8.1 percent year-over-year increase) and Bay Area (6.2 percent). Meanwhile, Florida markets such as Tampa (6.2 percent) and Miami (5.8 percent) followed closely thanks to a rapidly expanding Class A office stock.

Shifting supply pipelines

Some 146.6 million square feet of office space was under construction across the nation at the end of February, accounting for 2.2 percent of existing stock. New construction rates fell behind office deliveries, decreasing by 10 million square feet throughout the last six months.

Roughly 15 percent of construction starts this year took place in Dallas or Austin, with activity being concentrated in Sun Belt markets and life science hubs. Meanwhile, gateway markets—Manhattan in particular—experienced a slowdown in construction activity: Only 2.1 million square feet of office space broke ground in the borough since the beginning of 2021, considerably less than the 5.7 million square feet started in 2020.

Read the full Matrix Office National Report-March 2022

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Improvement in asking rents is balanced out by some vacancy increases in the largest U.S. markets.

Report Highlights

• Direct asking office rents increased in most markets, clocking in at $38.62 per square foot in January.
• Office vacancy averaged 15.7 percent across the top 50 U.S. office markets.
• Despite omicron-induced concerns, office transaction volume nationwide totaled $5.9 billion at the end of January.
• The active pipeline included 150.5 million square feet of office space under construction as of January.

National average full-service equivalent listing rates averaged $38.62 per square foot in January, up 120 basis points year-over-year. Direct asking office rents rose considerably in South Florida markets including Tampa ($29.70 per square foot, up 6.2 percent year-over-year) and Miami ($43.43, up 5.8 percent).

Meanwhile, office vacancy nationwide clocked in at 15.7 percent in January, up 110 basis points year-over-year. Markets such as Seattle (520 basis points), Austin (420 basis points) and San Francisco (410 basis points) recorded the largest gains in vacancy, driven by an excess of sublease space or company relocations.

Office-using employment on the mend

The office-using sector added 113,000 new jobs in January, up 4.4 percent year-over-year. Although the three office-using employment sectors have fully recovered to pre-pandemic levels, employment data from December 2021 shows that only 24 of the top 50 markets had more office-using employees than in February 2020. Austin recorded the largest office-using employment growth—11.4 percent year-over-year in January—followed by Miami and Dallas.

New supply concentrated in urban submarkets

Some 150.5 million square feet of office space was under construction across the nation at the end of January, representing 2.2 percent of total stock. Half of the amount was being erected in urban submarkets, defined as within the city center but outside of the CBD, where 19 percent of new office stock was taking shape. The remaining 31 percent was located in suburban submarkets. The largest pipelines on a percentage of stock basis were Austin’s (10.3 percent), followed by Miami and Nashville, with 8 percent each.

Read the full Matrix Office National Report-February 2022

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Ending what has been a challenging year, office investment actually topped 2020, as the sector looks for silver linings.

Report Highlights

• Direct asking office rents averaged $38.44 per square foot in December, 1.8 percent higher from the same period last year.
• Office vacancy plateaued over the last six months, averaging 15.5 percent across the top 50 U.S. office markets.
• National office transaction volume totaled $77.5 billion at the end of December 2021.
• The active pipeline included 156.6 million square feet of office space under construction at the end of 2021.

Office transaction volume equaled to $77.5 billion in 2021, surpassing the previous year’s total. Office assets traded at an average $293 per square foot at the end of December 2021. Interestingly, the average sale price of office assets in urban submarkets grew steadily over the previous decade—28 percent over the last two years. Meanwhile, prices in the Commercial Business Districts prices have fallen since the start of the pandemic and reached $323 per square foot in 2021, the lowest mark since 2014. Meanwhile, urban prices increased 28 percent over the last two years.

Tempered increase in asking rates, vacancy

Office vacancy reached 15.5 percent, 130 basis points higher year-over-year in December 2021, but stagnating in the second half of the year. National office asking rates averaged $38.44 per square foot in December, increasing by 180 basis points year-over-year. Significant upticks in asking rates were present in Boston (11.6 percent year-over-year increase), San Diego (11.2 percent increase) and Phoenix (9.5 percent increase).

Planning for the suburban future

Some 156.6 million square feet of office space was under construction across the nation at the end of 2021, with nearly half located in urban submarkets—defined by CommercialEdge as within the city center limits but not located in the CBD. However, the planned portion indicates a shift towards suburban development. At the start of 2020, 35 percent of the planned pipeline was located in suburban areas. The share jumped to 48 percent by the end of 2021.

Developers broke ground on 56.3 million square feet of office space in 2021, with more than half located in just 10 markets. Austin led the way in this sense, with 4.4 million square feet of new office space starts. Dallas and the Bay Area followed closely with 3.8 million square feet of ground breakings.

Read the full Matrix Office National Report-January 2022

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