Snapshots

Growth in tenant requirement points to near-term leasing acceleration

October 10, 2023

Contributors:

Nationally, active tenant requirements continue to trend upwards, growing by 2.6 percent quarter-over-quarter in gateway markets and 8.0 percent in secondary markets. Typically, increases in active requirements precede an acceleration of leasing volume by two to three quarters, though prospective tenants may transact slightly slower amid cyclical headwinds.

In most markets, requirements hit their recent minimum in Q1 2023 or Q4 2022, suggesting that an acceleration in leasing activity could be imminent across many geographies. Gross leasing activity declined marginally in the third quarter but has continued to outperform the first quarter after substantial growth in Q2.

As hybrid schedules become more ubiquitous and mandates take effect, the impacts of companies’ imbalance between hiring and office leasing may become starker. Since the end of 2019, office-using industries have expanded their employee headcount by 6.3 percent but have cut their office portfolios by 6.1 percent.

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