Is Virtual Work Driving Office Demand?

An interesting and potentially counterintuitive trend is emerging across U.S. office markets.

At the start of the pandemic, CBRE Econometric Advisors (CBRE EA) analyzed markets based on their propensity for virtual work. Thirteen of the 15 markets expected to see the most robust job growth through 2024 had previously been identified by CBRE EA as having a strong propensity for virtual work. Perhaps virtual work is a tailwind, rather than a headwind, for both markets and assets that are best positioned to capitalize on new working styles.

Further, job growth and new office supply appear to be highly correlated, suggesting that markets are responding efficiently to expected changes in occupier demand. Investment activity is also clustered in markets expected to see strong job creation, indicating investors and occupiers are aligned on which cities hold the most intrinsic value.

FIGURE 1: Occupier and Investor Demand Favors Markets Primed For Virtual Work

CBRE Research, CBRE Econometric Advisors Q4 2021, Real Capital Analytics Q4 2021