There is a lot of news about various companies reducing or vacating their lease space, but there are some positive stories of companies expanding and/or relocating to the area as well.
In this article I want to focus on the office space trends, as this is key indicator of an area’s commercial real estate and overall economic health.
There is an interesting report by Kastle Systems that monitors “badge swipes” of over 2,600 buildings representing 41,000 businesses across 47 states.1 Although not representative of all businesses, since many are smaller and don’t have electronic card entry systems like those offered by Kastle Systems, the report does give insight on the occupancy trends of corporate America.
For example, the US’ occupancy rate went from 95% prior to the pandemic to 15% shortly after the pandemic started. There has been a slow and steady rise in the occupancy rate to its current level of approximately 48%. That trend has stabilized which has the industry wondering if that’s where it will stay for a while.
Another interesting trend is that leasing activity has risen slightly to over 94 million square feet (still lower than pre-pandemic levels) with the average square feet going down to 3,221 sqft. This trend has been observable as most companies still need space — just not as much.
Another expected trend is a movement to higher quality office space since more of it is becoming available. Landlords are starting to lower rental rates and offer additional incentives such as free rent to attract new tenants.
Finally, and this also comes as no surprise, the Kastle report shows a higher office attendance mid-week, with employers and employees agreeing that Mondays and Fridays can be used as the work-from-home days.
My takeaway from this month’s update: the market has turned for the better for businesses needing lease space since more is becoming available, and landlords are offering incentives to attract tenants. In summary, if your lease is expiring in the next 24 months, give me a call to discuss a strategy tailored to your situation. My cell is 512-736-5933. My email is email@example.com
1 Costar, Phil Mobley, October 27, 2023, “Three Key Office Trends of 2023”