True office vacancy declining when excluding functionally obsolete space

Contributors:

Despite a large increase in available office space nationally, there is a lower share of available space that has been on the market for under 12 months than year-end 2019, demonstrating sustained demand for high-quality office space.
A sizable share of office inventory has become functionally obsolete. Historically, the majority of available office space on the market is comprised by listings less than 24 months old; today it comprises just over one-third of space on the market, with the remainder of vacancy largely uncompetitive with higher-quality inventory.
Excluding availabilities that have been on the market for over 24 months, overall office vacancy stands at 8.8% – a mere 30-basis-point increase from year-end 2019.
The increased bifurcation of the office market should enable high-quality segments to maintain pricing, while uncompetitive stock evaluates conversion possibilities or demolition.

Public-private office pricing disconnect is intensifying