Office Demand Remains Resilient in Q1

Executive Summary

• The U.S. office market remained stable in Q1, with positive net absorption, healthy leasing activity and relatively low levels of new supply.
• Net absorption of 2.3 million sq. ft marked the fourth consecutive quarter of positive demand. Net absorption slowed from 10 million sq. ft. in Q4 due to a high share of renewals, especially among large occupiers.
• Leasing activity increased by 18% year-over-year in Q1 to 54 million sq. ft., remaining above the five-year quarterly average.
• Prime office buildings continued to outperform the overall market, recording over 2 million sq. ft. of positive net absorption in Q1. The prime vacancy rate fell by 50 basis points (bps) quarter-over-quarter to 14.8%, 4.2 percentage points below the overall office vacancy rate.
• Office completions slowed to 3.3 million sq. ft., the lowest quarterly level since 2013. Completions still outpaced net absorption, causing the overall vacancy rate to increase by 10 bps quarter-over-quarter to 19%.