Office investment totaled $13.7 billion in the first half of the year, the latest Yardi Matrix US office market outlook shows.
Report Highlights
- The national office vacancy rate clocked in at 18.1 percent at the end of June, a 100-basis-point increase from the same time in 2023.
- National full-service equivalent listing rates averaged $31.67 per square foot in June, unchanged from last year.
- The office under-construction pipeline has significantly decreased, featuring 76.9 million square feet under construction as of June.
- Nationwide office transaction volume totaled $13.7 billion in the first half of 2024.
- Office properties traded at an average of $172 per square foot.
Office vacancy soars, rent trends shift
The national office vacancy rate reached 18.1 percent at the end of June, marking a 100-basis-point increase compared to the same period in 2023. Vacancy rates have risen across nearly all markets. San Francisco and Dallas saw the most significant increases, each with a 430-basis-point rise. Los Angeles followed with a 350-basis-point increase, while Austin and Seattle both experienced a 310-basis-point rise. Charlotte, N.C., saw a 300-basis-point increase year-over-year.
In June, national full-service equivalent listing rates averaged $31.67 per square foot, remaining unchanged from the previous year. This month, Yard Matrix expanded its calculation to include all 120 markets instead of just the top 50. As a result, current and future national figures cannot be compared to reports from before July 2024.
Several markets saw notable increases in average in-place rent. Boston led with a 7.4 percent rise, followed by Dallas at 6.7 percent, Miami at 6.1 percent, Atlanta at 4.4 percent, Tampa, Fla., at 3.1 percent and Detroit at 2.2 percent.
Active pipeline continues to decrease
The office construction pipeline continues to shrink, encompassing 76.9 million square feet under construction as of June, comprising 1.1 percent of total stock. Meanwhile, 23.5 million square feet of office space was completed in the first half of the year, while new project starts reaching 6.9 million square feet during the same interval. Demand for office space is unlikely to return to pre-pandemic levels. Banks are hesitant to finance new office projects and rising interest rates have made existing construction loans more expensive.
In Boston, the active pipeline featured some 12.5 million square feet as of June, or 5.0 percent of total stock. Austin had 4.3 million square feet of office space under construction, or 4.6 percent of stock. San Diego (4.9 million square feet) and Miami (2.9 million square feet) followed with 4.0 percent of stock. San Francisco had 4.9 million square feet of office space under construction, representing 3.1 percent of stock.
Office investment in the first half of 2024 totaled $13.7 billion, with the average sale price of an office asset clocking in at $172 per square foot. Manhattan led office investment with $1.4 billion, followed by Washington, D.C., with $1.3 billion in office sales.
Read the full Yardi Matrix Office Market Report: July 2024.
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