Office demand continues steady path of recovery

April 02, 2024
  • Jacob Rowden
  • Though the first quarter tends to see a minor deceleration in leasing activity, office demand continues to steadily grow, increasing for the fourth consecutive quarter by roughly 6% and growing nearly 30% since Q1 2023. Tenant requirements have now reached their highest level nationally since Q1 2022 and have returned to within 28% of pre-pandemic levels.

  • Improvement in tenants in the market has been widespread over the past year: from Q4 to Q1, more than 70% of markets contributing to the TIMs index saw QoQ improvement, and more than 90% have seen YoY improvement.

  • Preliminary lease volume in Q1 indicates relatively stable volume compared to Q4, when leasing activity jumped by over 14%, a sign that large-scale occupiers that had been absent from the market for much of 2023 are continuing to return to the market.

  • While tenants in the market and leasing volume are concurrently trending upwards, the U.S. will remain in a negative net absorption environment for much of 2024 as current leasing activity heavily favors downsizing existing portfolios – however, footprints are beginning to stabilize and expiration volumes are normalizing, pointing towards more stability in net absorption and vacancy rates towards the end of the year.