When looking at the office market on a year-over-year basis, our data shows the market has strengthened. We saw positive absorption in most submarkets with the overall market absorbing 234,079 SF, or about 1.02%, of the inventory. With this, the occupancy rate also rose by 2.17% and ended the quarter at 91.95%.
With these increases, it is surprising to see rents dropped by 0.25%, ending the quarter at $18.45 MG. This could be attributed to the new inventory we track. While overall rents saw a dip, Class B rents had a 2.81% increase year-over-year, ending the quarter at $16.84 MG.
The COVID-19 pandemic will most likely change the office market. Many companies are having to rethink the way they operate with their employees working from home. Some businesses need to collaborate between employees in order to be successful, making times like this harder. Others, like customer service operations, may realize they do not need to keep the overhead of large work spaces or, conversely, some may need to expand their footprint to keep social distancing. While the pros and cons vary company to company, there could be many that restructure their office model.
As employers re-evaluate their business models, employees may rethink their work environments. Before the pandemic, unemployment had remained around 2.6% for over a year. Some companies have already updated their work environments to attract talent. Some focused on blending business and leisure together, while others had their employees already working from home the majority of the time. With so many people now working from home, it will be interesting to see how many want to continue this trend or at least work from home part of the week. Only time will tell what approach companies and employees take and which model will grow after we exit the current environment.
At Colliers International in New Hampshire & Maine, we internally track over 22.96 million SF of office space across 6 submarkets. Our inventory includes buildings and condominiums 10,000+ SF and are classified as Class A, B, or C.
