Office Market Real Estate Trends

U.S. Office Market Outlook – November 2023

US Office Market Outlook November 2023
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As of October, the under-construction pipeline encompassed 98.7 million square feet of new office space, or 1.5 percent of the total stock, the latest Yardi Matrix report shows.

Report Highlights

  • Office vacancy continued its upward trajectory, reaching 17.8 percent in October across the top 50 U.S. office markets, up 150 basis year-over-year.
  • The under-construction pipeline featured 98.7 million square feet of office space at the end of October.
  • Nationwide office transaction volume totaled $27.9 billion year-to-date in October.
  • Office assets changed hands at an average of $196 per square foot.

Office vacancy, asking rates climb in Twin Cities

As of the end of October, the national office vacancy rate was 17.8 percent, reflecting a 150 basis-point rise compared to the same period last year, according to YardiMatrix data. The markets experiencing the most significant year-over-year increases in office vacancy were Detroit (690 basis points), Twin Cities (410 basis points), Seattle (400 basis points), San Diego (360 basis points), Denver (350 basis points), Charlotte (320 basis points) and San Francisco (310 basis points).

Meanwhile, the national average full-service equivalent listing rates in October averaged $37.77 per square foot, marking a 40 basis-point decrease year-over-year and two cents lower than the previous month. Notable increases in listing rates occurred in New Jersey (440 basis points year-over-year), Twin Cities (420 basis points), Atlanta (380 basis points), Philadelphia (330 basis points), Houston (310 basis points) and Denver (230 basis points).

Office demand continues to decelerate

Nationwide, the under-construction pipeline encompassed 98.7 million square feet of new office space as of October, constituting 1.5 percent of the total stock. In 2023, a substantial decline in office space demand has led to a deceleration in new development. The construction of new office space this year reached only 30.8 million square feet, suggesting that the annual total is likely to be slightly more than half of the construction starts observed in the previous two years.

As of October's end, Boston had 13.7 million square feet of office space in progress (5.5 percent of total stock), Seattle followed with nearly 6.6 million square feet (4.7 percent), San Francisco had 6 million square feet under construction (3.8 percent), and Austin's pipeline featured 5.7 million square feet (6.2 percent of total stock). According to Yardi Matrix, office sales totaled $27.9 billion year-to-date in October, with properties changing hands at an average rate of $196 per square foot.

Read the full Matrix Office National Report-November 2023.

About the author

Corina Stef

Corina Stef started her tenure as a music journalist a decade ago and has been occupying a full-time real estate editor and blogger position since 2017. She is a senior associate editor with Commercial Property Executive and Multi-Housing News who focuses on commercial real estate trends and in-depth stories.

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