Office Market Real Estate Trends

U.S. Office Market Outlook – October 2023

US Office Market Outlook October 2023
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Office transaction volume totaled $25.0 billion year-to-date in September, according to the latest Yardi Matrix office report.

Report Highlights

  • Office vacancy reached 17.8 percent in September across the top 50 U.S. office markets, up 120 basis points from the same time last year.
  • The under-construction pipeline featured 106.5 million square feet of office space at the end of September.
  • Nationwide office transaction volume totaled $25.0 billion year-to-date in September.
  • Office properties traded at an average of $198 per square foot, down 21 percent from 2022.

Asking rates record five-cent M-o-M decline

Nationwide office vacancy was 17.8 percent in September, up 120 basis points when compared to September 2022. Vacancy recorded the highest increases in markets with a large share of remote workers such as Seattle (500 basis points year-over-year, 22.3 percent vacancy), San Francisco (450 basis points, 24.2 percent), the Bay Area (370 basis points, 19.9 percent), Austin and Twin Cities (360 basis points each, 21.2 and 16.9 percent, respectively).

Meanwhile, national average full-service equivalent listing rates clocked in at $37.78 per square foot at the end of September, increasing by 30 basis points from September 2022 but five cents less than August 2023 rates. The largest gains in asking rates year-over-year were present in gateway markets such as Manhattan ($70.05 per square foot), San Francisco ($65.18 per square foot) and the Bay Area ($53.80 per square foot).

Demand for lab space remains elevated

Nationwide, the under-construction pipeline continued to further contract, featuring 106.5 million square feet of office space at the end of September, or 1.6 percent of total stock. Office construction has slowed in recent years due to a decline in demand and increasing vacancies, while lab space remains desirable due to recent scientific advancements and an aging population. As a result, 22 percent of the current active pipeline consists of life science space.

The largest office pipeline on a percentage of stock basis was found in Austin (6.0 million square feet underway, 6.6 percent of stock), Boston (14.5 million square feet, 5.8 percent), San Diego (5.2 million square feet, 5.4 percent), Nashville (3.1 million, 5.3 percent) and Seattle (6.9 million, 5.0 percent).

Office transaction volume totaled $25.0 billion at the end of September. At the same time, the average price per square foot stood at $198, representing a 21 percent drop—or more than $50 per foot—from 2022 values. Office investment was concentrated in gateway markets such as Los Angeles ($2.0 billion), Manhattan ($1.6 billion) and Boston ($1.3 billion), as well Washington, D.C. ($1.3 billion) and New Jersey ($1.1 billion).

Read the full Matrix Office National Report-October 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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