Office vacancy in Manhattan has hit a three-year low, while Boston office leasing has reached a two-year high. LA office leasing has reached its highest level since Q1 2020. Additionally, the availability of Class A office space in Chicago has decreased for the first time since the pandemic. Even San Francisco, which has struggled the most among major U.S. office markets with a vacancy rate of 37.3%, is on track for its best leasing year since 2019.

Here are a few key trends emerging from reports around the country: financial services firms are leading the way, lease sizes are gradually increasing, and top-tier buildings are securing the majority of deals. Although deals are still taking a long time to close, brokers are beginning to see signs of improvement in that area.

However, there are still many challenges ahead. Class B and C properties are largely being left out of the recovery in deal flow. In some cases, rising sublease listings are offsetting absorption, high-profile defaults remain common, and the recent increase in leasing activity isn’t enough to counter the significant levels of delinquency and declining property values. Moreover, the improvements seen in Q3 could be a temporary bump rather than a sign of sustained recovery.

On a positive note, the industry has finally managed to find some momentum, despite challenges dragging it down. Even some of the factors holding the market back may be nearing a low point. The wave of office sales at steep discounts—pricing was down an average of 12.4% year-over-year in Q2, according to RCA—has contributed to resetting the market. Reports indicate that numerous buildings have seen price reductions exceeding 50%.

Source: https://www.bisnow.com

Source: https://www.reuters.com

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