US Office Outlook – Q1 2023

In an economic landscape rife with challenges, corporate occupiers and investors alike continue to exercise a high degree of caution regarding their office portfolios, driving the continued softening of office fundamentals in the first quarter. Through the first few months of the year, companies continued to shift into defensive posturing in preparation for a possible economic slowdown, with many groups announcing layoffs and a large share of office tenants trimming their portfolios through sublease additions. In March, the failures of Silicon Valley Bank, Signature Bank and Credit Suisse injected newfound volatility into the market, both through direct impacts to client tenants whose financing was put in jeopardy, as well as growing concerns more broadly that diminution of office values over the past year will lead to further credit challenges to banks with large commercial real estate exposure.

The office market faces mounting cyclical challenges today which have hampered a full recovery from the pandemic.  Although remote work remains elevated, promising signs from corporate occupiers point to continued gradual re-entry and restoration of office demand as the U.S. moves towards a new equilibrium of workplace attendance.