How did COVID-19 hit the office markets and will the office rents recover?
 The COVID-19 pandemic has kickstarted the work-from-home trend, which will likely remain a significant factor in the activity in the office markets.

The outlook for the office markets across the United States might still appear murky but silver linings are starting to show as the economy maintains its momentum amid the vaccine rollout and the resurgence of consumer confidence. How will the office market fare in the next few months and what should office investors do?

# How did office markets perform in recent quarters?

The first three-month period of the year witnessed a subtle rise in the number of vacant office across the United States, with the national average vacancy rate increasing to 14.2%, according to Colliers.

Houston had the highest share of empty offices among all markets, with its vacancy level still above 20%. On the other hand, Central Idaho was the tightest office market, with only 2.3% of its offices sitting empty.

The overall net absorption in the US office markets fell by over 46m sq. ft., setting a new quarterly low. New York City led the decline, with a 12.2m sq. ft. decline in net absorption level. Los Angeles and Dallas-Fort Worth also registered substantial dips.

There is an expected surge in office spaces over the coming quarters given the elevated construction figures. During the first quarter of the year, 136.1m sq. ft. of office space was under construction, higher than the 125.2m sq. ft. — the previous cycle peak — achieved in the second quarter of 2008.

San Francisco Bay Area rose as the top market with the highest office construction activity. Over the first three months of the year, around 18.3m square feet of office space was in construction in the market.

New York City Metro followed, with 14.9m sq. ft. under construction. Washington D.C. (8.9m sq. ft.), Austin (7.8m sq. ft.), and Atlanta (7m sq. ft..) complete the top five markets with the busiest office construction activity.

# Will office rents recover?

Office rents seem to be in the midst of recovery across the US markets. In fact, the National Office Report by CommercialEdge showed that the average office lease rates across the country have increased by 1.4% on a yearly basis in March, resting at $38.67 per sq. ft.. On average, listing rates for office buildings with a size of 50,000 sq. ft. or larger increased by $0.36 from the previous month.

Offices in Manhattan had the most expensive rents during the month. The city reported an average listing rate of $85.82 per sq. ft.. San Francisco followed with lease rate hitting $69.66 per sq. ft..

Bay Area registered the third-highest average listing rate at $57.11 per sgft. On an annual basis, the region reported the highest year-over-year growth at 8.6%. The office market of Washington, D.C. clocked the second highest rental growth at 6.4%, followed by New Jersey with 3.9%.

However, a prediction by Moody’s Analytics CRE Solution earlier this year indicated that the office sector will likely suffer more this year than it did in 2020. The average rents across the US office markets were projected to drop by 7.5% this year before stabilizing in 2022.

Silicon Valley is expected to bear the brunt as San Francisco might realize an overall decline of 15% this year. The odds are also against New York, which could potentially record an 8.9% decline in rents. Overall, national rents have a possibility of declining by 1.8% over the year, driven by the drops in these two cities. However, the continuous vaccine rollout and a sustained economic recovery could see both markets post a turnaround in 2022.
[{"id": "ha07gdx", "text": "You can stop spamming this now.", "replies": [], "depth": 1}, {"id": "ha0kwrp", "text": "*How did COVID-19 hit the office markets and will the office rents recover?\"*\n\na) It was in all the papers.\n\nb) Yes.", "replies": [], "depth": 1}, {"id": "ha0xmdq", "text": "Are you getting paid by Colliers to post these over and over again?", "replies": [{"id": "hakc5b2", "text": "Doesn't [look like Colliers](https://www.smartcapital.center/team) to me", "replies": [{"id": "hakcqvr", "text": "Lol who TF are these people?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]