Negative Office Demand Continues to Ease

U.S. Office | Q4 2023

January 26, 2024 2 Minute Read

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Executive Summary

  • The U.S. office market closed 2023 with a fifth consecutive quarter of negative net absorption (-2.9 million sq. ft.), although the level of quarterly negative demand eased in the second half of the year.
  • Negative net absorption and the completion of 5 million sq. ft. of new supply increased the overall office vacancy rate by 20 basis points (bps) quarter-over-quarter to 18.6%—a 30-year high.
  • The average asking rent ticked up in Q4, while the average taking rent was unchanged. The widening gap between asking and taking rent reflects tenants' increased leverage in lease negotiations amid record-high vacancy.
  • Certain submarkets and buildings are seeing strong demand, contrary to the performance of their broader markets.
  • Several Sun Belt markets recorded positive absorption in 2023, while newer buildings continued to outperform lesser-grade assets. The average vacancy rate of post-2010 buildings was 3.4 percentage points below the U.S. average in Q4.