The Outlook for the Leading U.S. Office Markets is Improving
The downturn in office market fundamentals continued in Q2 2021, but the pace of decline slowed. Net absorption was negative in all but one of the top 10 markets and vacancy rates rose in seven. Rents remain under pressure and are falling in four markets.
Asking rates across the 10 markets fell by an average of 0.8% in Q2 2021, with the greatest falls occurring in the San Francisco Bay Area (-3.1%) and Boston (-1.9%). Effective rents continue to decline across all markets due to increased incentives on offer.
While net absorption across the 10 markets in the second quarter was a combined negative 9.1 million square feet, out of a U.S. total of negative 18.6 million square feet, the pace of occupancy losses has slowed. Combined net absorption across the 10 markets was negative 24.4 million square feet in Q1 2021.
Manhattan once again dominated these occupancy losses, with 4.9 million square feet of negative net absorption, compared to negative 11 million square feet in the first quarter. Conversely, in Atlanta, absorption turned positive to the tune of 383,630 square feet. While absorption remained negative in the remaining eight markets, levels were lower in every market except Los Angeles.