Q3 New Supply Outstrips Office Demand

Executive Summary

• Net absorption of 343,000 sq. ft. in Q3 fell dramatically from the 6.2 million sq. ft. in Q2 but was a significant improvement from the 4.3 million sq. ft. of negative net absorption posted a year ago.
• Despite positive demand, the overall vacancy rate increased by 30 basis points (bps) to 17.1% in Q3 as 12.1 million sq. ft. of new construction was delivered. Once again, downtowns fared worse than the suburbs.
• Leasing activity fell for the third consecutive quarter as occupiers continued to delay leasing decisions amid economic uncertainty, high inflation and rising interest rates.
• The average asking rent across all classes was largely unchanged during the quarter at $35.23 per sq. ft. However, effective rents for top-tier properties in some of the largest markets have increased by 4.2% year to date through Q3.