Q1 Leasing Activity Slows, Renewals Rise

  • The COVID-19 pandemic has forced some states to impose strict stay-at-home orders that are adversely affecting many industries. This is leading the U.S. economy into a recession that will result in very sharp declines in GDP for H1 2020 and in job losses, particularly in the retail, food & beverage and transportation sectors.
  • A drop in U.S. office leasing activity, as well as a significant increase in lease renewals, were two major signs of COVID-19’s early impact on office markets in Q1 2020.
  • Office market fundamentals generally remained stable despite a 20-basis-point increase in the overall vacancy rate, which was not unexpected.
  • The overall downtown vacancy rate increased by 30 basis points (bps) in Q1, while the suburban vacancy rate increased by 10 bps and remained below its trough prior to the Great Recession.
  • Nine of the 10 largest markets recorded vacancy rate increases in Q1. New Jersey’s vacancy rate was unchanged.