Snapshots

Office leasing activity improves in second quarter with fastest rate of growth since 2021 Q2

July 13, 2023

Contributors:

After three consecutive quarters of decline, U.S. office leasing has begun to rebound in the second quarter, with gross leasing volume growing 11.6% quarter-over-quarter (QoQ), the fastest growth rate since Q2 2021.

As a testament to broad momentum, nearly two-thirds of tracked markets, 35 of 53, saw QoQ leasing growth. Since Q1 2019, there have only been two quarters with a greater share of markets seeing positive momentum: Q1 2019 when 74% of markets saw QoQ growth and Q1 2021 when 72% of markets were growing.

Tentative signs of large-scale requirements returning are appearing: after falling to the lowest level since 2013, Q2 saw an over 10% increase in the number of lease transactions above 100,000 s.f. signed, indicating that the intense defensiveness among a vast majority of office occupiers is beginning to fade.

The U.S. office market saw other promising indicators in the second quarter: net absorption remains negative but has decelerated, and sublease vacancies have reached an inflection point, with the pace of new additions beginning to slow.

June CPI data slowed to its lowest growth rate since March 2021, as price growth year-over-year declined to 3.0 percent, quickly approaching Federal Reserve targets and signaling a near-term easing of interest rates.

Law firm leasing is exceeding pre-pandemic levels

Positive leasing momentum in recent quarters has driven gross U.S. office leasing activity to 75% of pre-pandemic levels.

Conversions are helping offset the rise in vacancy

Conversions are mitigating the rise in vacancy

Office demand continues steady path of recovery

Office requirements trending upwards for four consecutive quarters