New Sublease Offerings Signal Uncertainty in Office Space
The U.S. economy displayed mixed signals throughout 2022. Near-record job growth caused the unemployment rate to end the year at 3.5%, matching a five-decade low. The annual inflation rate hit a 41-year high in June but was followed by six month of deceleration. This caused the Federal Reserve to ease up from consecutive 75 bps monthly interest rate hikes, while leading economic indices point to a possible recession in 2023. Despite this uncertainty, consumer confidence hit its highest level in December since last spring. The Indianapolis-area unemployment rate is near a historic low and traditional office-using sectors continue to add jobs. However, remote and hybrid work is increasingly impacting the office market and leading more companies to attempt to sublet portions of their space.
- Full-building sublease options drove availability to a record high.
- High-quality space in newly constructed or renovated assets continues to outperform the rest of the market.
- Large tenants rightsizing their space needs resulted in more than 300,000 sf of negative absorption in a single quarter.
- The direct vacancy rate started and ended the year at 18.2%.