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U.S. Office Demand Slows Modestly in August

CBRE Pulse of U.S. Office Demand

23 Sep 2021 5 Minute Read

Read the full report and data for all 12 markets

The CBRE Pulse of U.S. Office Demand slowed modestly in August. This reflected slower job growth and a resurgence in COVID-19 infections that delayed occupiers' return-to-office plans.

What is the CBRE Pulse Report? 

To gauge the pace of recovery, CBRE has created three indices for the 12 largest U.S. office markets – Atlanta, Boston, Chicago, Dallas/Fort Worth, Denver, Houston, Los Angeles, Manhattan, Philadelphia, San Francisco, Seattle, and Washington, D.C. Using CBRE data, these indices measure office market activity each month and provide early indications of when and where momentum in office demand may be shifting. These metrics - space requirements of active tenants in the market (TIM), leasing activity and sublease availability – provide a clear picture of office demand amid the COVID-19 pandemic.

August Findings

After steadily increasing for the first six months of 2021, overall office demand fell slightly in August due to the recent resurgence of COVID-19 infections. The U.S. TIM index fell by 3 points in August to 83, near its May 2021 level. The U.S. Leasing Activity Index fell by 6 points to 71 but remained well above its pandemic-low of 52 in December 2020. On a positive note, the U.S. Sublease Availability Index fell by 3 points in August to 191 – the second consecutive month of decline. Nevertheless, there remains a sizeable amount of sublease space in the largest U.S. markets. 

Note: All market data is for the metropolitan area with the exception of Manhattan and also San Francisco, which includes the city and the peninsula.
Note (2): Prior month data has been revised from previous reports to reflect new information. Numbers presented in this report supersede figures presented in previous editions of the Pulse of U.S. Office Demand.

U.S. Average Performance Index

Figure 1: Indexed Average Performance of Sublease Availability, TIM, and Leasing for the Top 12 U.S. Markets

Source: CBRE Research, August 2021.

August Demand Recovery by Market

Boston continued to set the pace for office demand recovery, while Atlanta and Dallas/Fort Worth made considerable gains. Los Angeles also remained strong, though the market saw a significant slowdown in leasing in August, likely because of renewed office occupancy restrictions.

Figure 2: July Office Market Recovery Scale, Top U.S. Markets

Image of July Office Market Recovery Scale, Top U.S. Markets

Source: CBRE Research, August 2021.

Tenants in the Market Index

Figure 3: Indexed Square Footage of Tenant Requirements Compared with 2018/2019 Average

Source: CBRE Research, August 2021.

The COVID-19 resurgence caused a mild drop in TIM activity in August. From a low point of 68 in January 2021, the U.S. TIM Index (baseline: 100) had six consecutive monthly gains. After hitting a pandemic high of 86 in July, the TIM Index fell modestly to 83 in August. While the decline partially results from the conversion of some TIM to leases, it also reflects renewed caution on the part of office occupiers.

Eight of the 12 markets in the PULSE saw their TIM index fall month-over-month in August, including Boston (124), Washington, D.C. (84), San Francisco (79), Manhattan (79), Denver (78), Los Angeles (71), Houston (68) and Chicago (62). In most markets, the decline was modest (ranging from 1 to 6 points), while Denver (-19 points) and Chicago (-9 points) saw more significant slowdowns.

Four markets bucked the trend, with Dallas/Fort Worth (92), Atlanta (91), Seattle (86) and Philadelphia (85) all recording monthly net growth in tenant requirements. Atlanta had the largest increase, up by 9 points from July (82).

Despite the modest setback in most markets, the state of TIM in August 2021 was generally positive. Boston tenant interest has outpaced baseline levels for most of the pandemic, while Dallas/Fort Worth and Atlanta have reached TIM levels of more than 90% of their pre-pandemic baselines. Six other markets have reached more than two-thirds of their baseline levels.

Figure 4: August 2021 TIM Index–Top 12 U.S. Markets

Image of August 2021 TIM Index–Top 12 U.S. Markets

Source: CBRE Research, August 2021.

1 TIM Index methodology note: CBRE tracks the total square footage of requirements from active tenants in the market, with minimum requirements of 10,000 sq. ft. The TIM Index compares the total monthly TIM requirements to a pre-pandemic baseline, which is the average of TIM requirements recorded by CBRE in 2018 and 2019. The index level for the baseline is 100. In most cases, when tenant requirements are given as a range, the index uses the minimum square footage., However, Seattle records TIM using the average requirement within the tenants' size range, while Philadelphia uses the maximum square footage.

Leasing Activity Index

Figure 5: Indexed Monthly Leasing by Market Compared with 2018/2019 Average

Source: CBRE Research, August 2021.

Leasing activity also slowed somewhat in August, likely a result of rising COVID infections. After a nearly steady upward trajectory from its low point in December 2020 to 77 in July, CBRE's U.S. Leasing Activity Index fell by 6 points to 71 in August.

The other eight markets trail behind the top markets, though many of them have seen modestly improved Leasing Activity Indices. Houston (64), Washington, D.C. (63), San Francisco (61), Dallas/Fort Worth (61) and Manhattan (60) have all recovered more than halfway toward pre-pandemic leasing levels.

Five of the 12 Pulse markets saw their leasing indices improve in August, despite the COVID surge. Atlanta had the biggest month-over-month growth, up by 16 points to 99. Houston (67), Manhattan (64), San Francisco (54), and Chicago (53) saw modest increases.

The other seven markets saw their leasing activity indices fall in August, including Los Angeles (105), Boston (84) and Seattle (82). Despite their slide, these markets are all doing relatively well in their leasing recovery. Other markets that saw declines in August include Denver (62), Dallas/Fort Worth (58), Washington, D.C. (58) and Philadelphia (56).

Figure 6: August 2021 Leasing Activity Index – Top12 U.S. Markets

Image of August 2021 Leasing Activity Index – Top12 U.S. Markets

Source: CBRE Research, August 2021.

Leasing Index methodology note: Leasing activity includes all new leases, expansions and renewals of 10,000 sq. ft. or more that close each month. The Leasing Activity Index uses a rolling three-month average of leasing activity. Most markets the weighted 20% for the current month, 50% for the previous month and 30% for two months prior. For New York and Boston, wheremore accurate leasing data is available by the end of each month, the weights are 50% for the current month, 30% for the previous month and 20% for two months prior. The monthly rolling average is compared with a pre-pandemic baseline, which is the average monthly leasing activity between 2018 and 2019. The index level for the baseline is 100.

Sublease Availability Index

Figure 7: Indexed Sublease Availability by Market Compared with 2018/2019 Average

Source: CBRE Research, August 2021.

Despite the delay of many occupiers’ return to office plans, the U.S. Sublease Availability Index saw modest improvement in August, falling by 3 points from July. This marks the second consecutive modest monthly decline since the index peaked in May at 195.

Local market performance was an even mix, with half of the 12 markets recording month-over-month drops in their sublease indices. These included Washington, D.C. (133), Boston (158), Denver (187), Manhattan (191), Atlanta (194) and Seattle (261). Seattle saw the biggest improvement, with its index falling 24 points month-over-month, followed by Denver with a 20-point drop. Boston has recorded seven consecutive monthly declines in its sublease index, down by 26 points from its peak of 184 in January 2021.

Los Angeles (161), Dallas/Fort Worth (161), Philadelphia (217) and San Francisco (345) all saw their sublease indices increase in August. Dallas/Fort Worth and Philadelphia both marked their highest levels of sublease availability yet in the pandemic period in August. On the other hand, Philadelphia appears near its peak, with few additional sublease listings on the horizon and some occupiers beginning to withdraw sublease listings.

Houston saw no change in its August Sublease Availability Index, which at 96 remained the lowest of all Pulse markets. However, Houston’s sublease inventory remains historically high.

Figure 8: August 2021 Sublease Availability Index – Top 12 U.S. Markets

Image of August 2021 Sublease Availability Index – Top 12 U.S. Markets

Source: CBRE Research, August 2021.

Sublease Index methodology note: Sublease availability measures the total square footage of sublease space available for occupancy. The Sublease Availability Index compares monthly sublease availability totals with a pre-pandemic baseline, which is the average amount of sublease space available in 2018 and 2019. The index level for the baseline is 100.

Note: In contrast to the Leasing and TIM Indices, a higher score on the Sublease Index is considered undesirable as it reflects an increase in available sublease space.

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