In vibrant urban neighborhoods, even older buildings see relative stability

February 20, 2024
  • Jacob Rowden
  • Elena Lanning
  • Mixed-use neighborhoods have resisted the broader downsizing trend facing the U.S. office market, gaining more than 15 million s.f. of occupancy since the onset of the pandemic.
  • Mixed-use markets—vibrant, active neighborhoods often located on the periphery of urban cores, and which have a greater diversity of commercial, residential and entertainment/attraction space—have consistently siphoned tenant demand from traditional commercial cores, leading these areas to see net absorption amounting to 5.5% of inventory since the pandemic onset, a stark contrast to the remainder of the U.S., where net absorption as a share of inventory has averaged -5.6%.
  • The strong demand for these areas even drives outperformance for aging stock within mixed-use submarkets—buildings more than a decade old in mixed submarkets have lost less than 5% of their occupancy during the pandemic, while nationally older buildings have lost 8.5% of occupancy since the pandemic began.
  • Several tenants have recently made decisions to relocate into mixed-use environments: law firm Duane Morris signed a 10,000-s.f. lease in Armada Hoffler’s Wills Wharf in Baltimore, bringing the project to 97% leased; cruise line MSC Group purchased the entire 130,000 s.f. office component of SG Holdings’ Sawyer’s Walk in Miami; and consumer goods company Vestis signed a 45,000-s.f. lease at Armada Hoffler’s Southern Post project in Atlanta.