Office Demand Further Weakens

U.S. Office | Q1 2023

May 1, 2023 2 Minute Read

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Executive Summary

  • Despite continued office-using job growth, Q1 saw 16.5 million sq. ft. of negative net absorption—the weakest quarter for office demand in two years—due to recession fears and hybrid work arrangements.
  • Nevertheless, several Sun Belt markets achieved positive net absorption during the quarter, including Nashville, Charlotte, Miami and Dallas/Ft. Worth.
  • Negative net absorption and the completion of 5.4 million sq. ft. of new office space pushed the overall vacancy rate up by 50 basis points (bps) quarter-over-quarter to 17.8%.
  • Average asking rent was unchanged from the previous quarter and up by just 1% from a year ago to $35.42 per sq. ft. However, tenants’ negotiating power strengthened, widening the gap between asking and taking rents to $3.96 per sq. ft.