Office Outlook –
How has the office market reacted to widespread disruption caused by COVID-19 and what are the factors influencing the second half of 2020?
While the first quarter of 2020 was only partially affected by COVID-19, the full onset of the global pandemic caused widespread disruption to the U.S. office market in Q2. With much of the country moving from the workplace to the home office due to widespread shelter-in-place mandates, office tours became virtual and future space requirements were anyone’s guess.
Three key trends from the second quarter include:
- Gross leasing volume dropped by an unprecedented 53.4% in Q2, but we expect some degree of rebound in Q3 and Q4 for gross leasing volumes
- The office market recorded 14 million s.f. of occupancy losses (the steepest drop since Q2 2009), bringing year-to-date net absorption to -8.4 million square feet
- Sublease vacancy rose by 5.2 m.s.f. in Q2, with a further 15.7 m.s.f. of additional new shadow space becoming available although not yet vacant
As we head into the second half of 2020, all eyes will be on tenants’ response to office re-entry and the ability of states to withstand and contain a potential second wave of the coronavirus.
Q2 2020 U.S. Office highlights
Q2 2020 U.S. Office statistics by market
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**The health, policy, economic and financial disruption stemming from the COVID-19 pandemic continues to create a fluid and evolving environment for the office market. Although data from Q2 is providing greater clarity about conditions and the short-term real estate outlook, there remains significant uncertainty surrounding market dynamics and long-term trajectories and, as a result, we will continue to monitor fundamentals closely as the situation unfolds. Please feel free to contact us if we can assist.