CBRE Report: US Office Market Recovery Remained Muted In March, Even As More Companies Searched For New Space

Companies’ searches for new office space increased in March to the highest level since the COVID-19 pandemic began, but actual leasing activity remained below pre-pandemic levels in most of the 12 largest U.S. office markets, according to CBRE’s monthly “Pulse of U.S. Office Demand” report.

To gauge the pace of recovery, CBRE’s monthly report tracks three leading indicators of office market activity in the largest 12 U.S. office markets: tenants-in-the-market (TIM), which quantifies the amount of office space that companies are actively seeking; leasing activity in the form of finalized lease agreements; and the availability of sublease space.

A national view of the indices outlines the scope and trajectory of the office market’s recovery. For each index, a reading of 100 equates to the pre-pandemic levels of 2018 and 2019.

The March results of CBRE’s three indices again show Boston leading the recovery among the 12 markets, as it has since the beginning of the pandemic. Others showing progress in March include Dallas-Fort Worth and Los Angeles. Manhattan posted March gains in leasing activity and TIM. Manhattan’s TIM activity has been gaining momentum since the start of 2021, which translated into an increase in leasing last month.

The overall trajectory of the recovery has slowed since the omicron variant of COVID-19 emerged in November 2021.

The U.S. TIM Index registered 91 in March, up two points from a month earlier. The ranks of markets posting TIM index readings above their pre-pandemic level expanded to four in March from three a month earlier as Manhattan (105) joined Houston (130), Boston (127) and Dallas-Fort Worth (110) in that group. Overall, TIM indices increased or held steady in eight of the 12 markets.

The Leasing Activity Index fell by 15 points in March to 72, reflecting a decline in activity in 10 of the 12 markets. Only Manhattan (up 11 points to 68) and Houston (up six points to 58) posted gains in March.

The Sublease Availability Index increased by three points in March to 199, still below its pandemic peak of 206 in June 2021. Six of the markets registered March gains: Houston, Washington, D.C., Denver, Atlanta, Philadelphia and Seattle. Three (Boston, Dallas-Fort Worth and San Francisco) generated declines. And the other three (Los Angeles, Chicago and Manhattan) held steady.

“Many influences are playing out across the office market early this year, and that can cause fits and starts in activity,” said Julie Whelan, CBRE Global Head of Occupier Research. “We see ample evidence through our surveys and client conversations that many companies are in the midst of their gradual return to the office through the balance of this year. As that unfolds, companies will gain more clarity on their office needs and that in turn will contribute to a pickup in leasing activity.”

To read the full report, click here.