Office Downturn Continues in Q3

  • U.S. office market fundamentals deteriorated in Q3 with 33.5 million sq. ft. of negative net absorption—the largest quarterly decline since 2001.
  • 89% of the negative net absorption year-to-date has been in California, Texas and the Northeast Corridor between Boston and New York.
  • Total office leasing activity was down by 39% year-over-year in Q3 and the renewals share of all leases increased to 45%. However, Q3 leasing activity was higher than Q2 due to a mild acceleration in September.
  • The overall vacancy rate rose by 1 percentage point to 14.0%. Available sublease space increased, but the pace of additions slowed in August and September.
  • Average gross asking rents increased by 0.9% from Q2, reflecting landlords’ reluctance to reduce rents and instead provide more concessions.