New Office Space Starts Record a Slowdown
Office starts year-to-date in September amounted to 46.6 million square feet of space, the Yardi Matrix office report shows.
- Full-service equivalent listing rates clocked in at $37.67 per square foot in September, down 240 basis points from September 2021.
- Office vacancy averaged 16.6 percent across the top 50 U.S. office markets, up 180 basis points from the same period last year.
- The under-construction pipeline contracted and included 139.1 million square feet of office space as of September.
- Office transaction volume nationwide totaled $69.3 billion at the end of September.
As of September, the average full-service equivalent listing rate was $37.67 per square foot, decreasing by 240 basis points year-over-year. Meanwhile, office vacancy nationwide reached 16.6 percent in September, up 180 basis points when compared to the same period last year. Markets with a high number of company relocations such as Miami (-140) and Charlotte (-130 basis points) had some of the highest decreases in vacancy.
Office transaction volume in the first three quarter of 2022 totaled $69.3 billion. Investors focused their attention on the East Coast, especially on Washington, D.C. ($4.1 billion year-to-date in September) and Boston ($4 billion), as well as California markets including the Bay Area ($3.9 billion) and Los Angeles ($2.9 billion).
Office assets traded at an average of $263 per square foot at the end of September. San Francisco ($941 per square foot) and Manhattan ($858 per square foot) remained the most expensive office markets, followed by Seattle ($583 per square foot) and Boston ($485 per square foot).
Office starts down in gateway markets
The active pipeline included some 139.1 million square feet of office space across the nation at the end of September, representing 2.1 percent of total stock. Projects in planned stages account for an additional 6.2 percent. Construction activity was concentrated in Sun Belt markets with high in-migration such as Austin (7.4 million square feet underway accounting for 8.5 percent of stock), Charlotte (5.7 million square feet, 7.7 percent) and Nashville (2.3 million square feet, 5.6 percent).
Some 46.6 million square feet of office space broke ground nationwide year-to-date in September, with the yearly total most likely to be on par with the 62.2 million square feet started in 2021. Since the start of the pandemic, office starts have declined in gateway markets; Some 3.6 million square feet was started in Los Angeles in 2019, while this year only 61,000 square feet of non-owner-occupied office space broke ground. Similarly, office starts in Manhattan decreased from 3.2 million square feet in 2019 to 754,000 year-to-date in September.
Read the full Matrix Office National Report-October 2022