Office Demand Turns Negative in Q4

Executive Summary

• U.S. office market fundamentals weakened in Q4 2022. After four consecutive quarters of positive demand, the market recorded 5.9 million sq. ft. of negative net absorption.
• With occupiers returning more space to the market, the overall vacancy rate increased by 30 basis points (bps) to 17.3%. The downtown vacancy rate exceeded the suburban rate for the third consecutive quarter.
• Economic uncertainty, coupled with occupier downsizings due to hybrid work, caused leasing activity to drop by 23% quarter-over-quarter and by 36% year-over-year to 39 million sq. ft. in Q4, the lowest level since Q1 2021.
• Average asking rent increased slightly in Q4 to $35.38 per sq. ft., up by 1% from a year ago.