Q3 2024 Office Markets Report: Examining Key Trends in the 100 Largest Office & Coworking Markets

As the U.S. office sector continues to navigate the complex, post-2020 landscape, it evolves under the influence of shifting economic winds, changing work trends, and the need to refresh a significant portion of the national office stock. While general discourse in the face of headwinds tends to lament the future of office space, the sector itself has historically adapted to changing dynamics and bounced back stronger.

Even as this particular round of headwinds feels unprecedented in scale and character, the U.S. office sector is perhaps more likely than ever to adapt creatively to currents such as shifting workforce paradigms, evolving space requirements, highly dynamic global trends, breakneck technological advancements, and economic correction

Despite changes in the debt economy resulting in more distressed assets showing up and acceptance of changes in office use spreading on a wider scale, we expect the office sector to come up with creative and ingenious ways to handle the higher-vacancy early phases of what is likely to be a reshuffling spreading multiple decades.

Peter Kolaczynski, Director, CommercialEdge

Key Takeaways

Top 10 Office Markets in Q3

• Boston bags top scores for vacancy, pipeline and asking rates to rank #1 in Q3 2024 among office markets larger than 100 million square feet. San Diego and Orange County complete the podium.
• Miami’s office development pipeline propels the market to the top of the chart for entries smaller than 100 million square feet. It’s followed by the West Palm Beach-Boca Raton, Fla., and Inland Empire, Calif., office markets.

Top Scores for Each Ranking Metric Category (jump to section)

• Vacancy: Nearly 20 office markets saw a quarter-over-quarter drop in vacancy, but none marked a decrease greater than 3%.
• Asking rent: More than half of the 100 office markets we compared saw an increase in average asking rent from Q2 to Q3.
• Office construction: Pipeline data showed more than 102 million square feet added across the 100 largest markets during Q3. Austin, Texas, boasts the largest pipeline under construction in Q4.
• Coworking space: The local coworking scene expanded during Q3 2024 in nearly 85% of the markets we compared.
• Loan maturities: Austin, Texas; the Bay Area; and San Diego are looking at the lowest percentages of loans maturing in 2024.
• Search trends: Year-over-year online search trends show steady interest in both coworking and office space.

We still see significant post-2020 fluctuations in market fundamentals across the U.S. office sector. Most notably, very dynamic leasing rate trends due to large amounts of space moving online and offline, in conjunction with changes in how office space is being marketed. What’s more, new project deliveries disproportionately affect both asking rate averages and vacancy rates, all of which support the expectation to see greater fluctuations than we were previously used to, both year-over-year and even from one quarter to the next.

Peter Kolaczynski, Director, CommercialEdge

With a total of nearly 78 points out of 100, Boston scored best among the larger office markets we analyzed. In fact, the Massachusetts powerhouse stood out for several metrics, including pipeline, vacancy, and asking rates. Although Boston office space was not spared by the nationwide trend of vacancies, it nevertheless presented the second-lowest Q3 vacancy rate in this group. And, with more than 13 million square feet of office space added during this year’s third quarter, Boston boasted the largest deliveries pipeline. Furthermore, developers here had nearly as much under construction at the start of Q4, which amounted to nearly 4% of stock that’s currently in the works.

The market also claimed the highest score for its year-over-year increase in average asking rent, which was partially the result of continuing flight to quality: Tenant interest remains notably concentrated on best-in-class assets, which ask for higher asking rates.

San Diego claimed the second-highest score in the large markets ranking, earning notable performances across several of the metrics we compared. Specifically, in Q3 2024, the California market added the third-most office space as a percentage of stock (nearly 4%). Similarly, the local under-construction pipeline also represented the third-largest market expansion in development at the start of Q4 among the larger markets in our ranking.

Orange County ranked third among the larger markets in Q3 2024. During the last quarter, the second-highest-scoring California entry had the fifth-lowest vacancy rate; attracted the second-highest year-over-year increase in the average monthly online searches for office space; and earned the fifth-best score for increase of asking rates throughout 12 months.

Next, Manhattan scored fourth-best among the larger markets in Q3 2024. The market’s strongest suits were vacancy, online interest in office space, and loan maturities. Here, the Big Apple’s office space had the third-lowest vacancy rate last quarter and attracted the third-highest 12-month increase in monthly online searches. At the same time, office loans maturing represented 4.6% of the total for the fifth-highest score for this metric.

Then, as the last of three California office markets to make the top 10, LA rounded out our top five in Q3. The vacancy rate for office space in Los Angeles was the lowest among entries larger than 100 million square feet. The City of Angels was also the office market to see the largest decrease in vacancy from the previous quarter.

On the opposite coast, Philadelphia earned the sixth-highest score among the larger markets by standing out for: the sixth-highest year-over-year increase in average asking rent for office space; the sixth-largest market expansion as a percentage of stock (nearly 2%); the seventh-most office space added between July and September 2024; and the seventh-lowest vacancy rate in Q3.

Meanwhile, Washington, D.C. took seventh place in Q3. Its best-scoring metrics include vacancy (the sixth-lowest rate in Q3) and a boost to the local coworking scene with the fourth-most coworking space square footage added among the larger markets in our ranking.

Nearby, Baltimore — which scored eighth-highest among the larger markets — claimed its most notable performances for metrics related to the local coworking scene. In particular, Charm City was third for the growth of its coworking segment in the local office market. It also attracted the fifth-largest year-over-year increase (of the large markets in the ranking) in the average monthly online searches for coworking space.

It’s worth noting here that there are several factors nurturing the growing local coworking scene. Among them, Baltimore’s unique cultural character, rich history, and relatively affordable living continue to attract residents and workers to the central business district. Additionally, the city’s abundance of remote-friendly office jobs, strong community spirit and quirky community spaces fuels its rise among the best U.S. cities for working parents, as well as being one of the top places to launch an MBA career.

Phoenix, ninth among markets larger than 100 million square feet, earned the second-best score for its decrease in vacancy rate compared to the previous quarter. The Arizona market’s best-performing metrics also included loan maturities (the fourth-lowest percentage of loans maturing this year), in addition to the growth of its coworking segment in the local office market with the fifth-best score.

Not to be outdone, Austin, Texas, wrapped up the top 10 in Q3 after earning its best scores for metrics pertaining to the local office pipeline. Namely, the Texas market added the third-most office space in Q3, which represented the largest market expansion as a percentage of stock (nearly 6%). Similarly, Austin boasted the largest under-construction pipeline: Office space in development here amounted to a little more than 4% of stock at the start of Q4.

With a total score of roughly 70 points out of 100, Miami ranked first among office markets smaller than 100 million square feet in the third quarter. Plus, the sunny Florida destination boasted a noteworthy development pipeline: Among this group of markets, Miami added the third-most new office space in Q3 and had the most square footage under construction at the start of Q4.

What’s more, despite an apparent slowdown in new-to-market tenants and headwinds sweeping the national office sector, the Florida gem has remained one of the strongest markets in the U.S. With almost 4 million square feet of Miami office space under construction and recently completed high-end properties commanding unprecedented rents, this city’s magic seems to be in no short supply.

Staying in Florida, West Palm Beach-Boca Raton garnered the second-highest total score among markets with less than 100 million square feet. This was largely due to its performance in two metrics — vacancy and pipeline. The second-best-ranking Florida market in this group, West Palm Beach-Boca Raton also had the third-lowest vacancy in Q3 after claiming the fifth-largest dip in vacancy rate the previous quarter. Development in the south Florida market also stood out for its under-construction pipeline with the fourth-most office space in development at the start of Q4 2024 as a percentage of stock.

Across the country, Inland Empire, Calif., took third place in the smaller markets ranking and was the only mid-sized market west of the Mississippi to rank in this top 10 in Q3 2024. Keep in mind that, last quarter, the California office market boasted the lowest vacancy in this group, despite a roughly one percentage point increase from May to September of this year.

Back on the East Coast, Richmond-Tidewater in Virginia received the fourth-best score among the mid-sized entries in our ranking. In this case, its best-performing metric pertained to the growth of its office segment. More precisely, the nearly 1.4 million square feet of office space added here during Q3 marked the sixth-largest market expansion in this group. Then, Richmond-Tidewater earned its next-best score for vacancy as the market had one of the 10 lowest rates of unoccupied office space in Q3.

Nashville, Tenn., rounded out the top five, primarily due to its performance across pipeline and coworking metrics: Within this group, Nashville added the most office space square footage during Q3 and had the third-most office space under construction at the start of Q4. Notably, the Tennessee market also stood out for having added the most coworking space during this year’s third quarter, which amounted to the fourth-best score for the growth of its share of coworking out of the total office space in the market.

In the Northeast, Portland, Maine, landed sixth-best among mid-sized office markets. The city earned its best score for the growth of its coworking scene: Coworking square footage added in Q3 made for the largest growth of the share of coworking in the local office market among the entries in this ranking. Portland also boasts several attractive advantages for fans of flexibility, some of which placed it among the best cities for remote work, according to a recent ranking by Remote.com. These include high cultural diversity, which makes it a good destination for international workers on the go; housing costs below the national average; and cool coastal weather, just to name a few.

Orlando, Fla., placed seventh, mostly on the shoulders of its performance in the expansion of the local coworking scene and office asking rate growth. To that end, in Q3 2024, the central Florida market added more than 180,000 square feet of coworking space, which marked the fourth-most such expansion among the entries in this group. Data also showed that Orlando office space saw the fourth-largest increase in average asking rent — roughly 13% year-over-year.

Still in Florida, the Southwest Coast market landed eighth in this ranking group after earning its best score for office vacancy. Specifically, the Florida entry had the second-lowest vacancy in Q3 among markets smaller than 100 million square feet. That followed a modest, 0.2-percentage-point dip from the previous quarter.

Slightly north, Tampa-St. Petersburg-Clearwater was the ninth-best scoring market in Q3. The Florida metro attracted the third-highest increase in average monthly online searches for office space and scored among the 15 best for expansion of the local coworking scene: With a little more than 82,000 square feet of coworking space added to the market during Q3, Tampa landed in 13^th for this metric.

Another Florida metro — Fort Lauderdale — wrapped up the top 10. Its best-scoring metrics included the expansion of the local coworking segment, vacancy, and asking rate. Here, the nearly 145,000 square feet of coworking space added to the office segment in Q3 was the seventh-largest such expansion among the mid-sized markets we surveyed. As such, it made for the seventh-largest increase of the coworking segment out of the city’s total office space among the mid-sized markets we analyzed. Meanwhile, office vacancy saw the biggest decrease from the previous quarter (2.4 percentage points). The average asking rate for office space here in Q3 was nearly 12% higher year-over-year, for which the Florida market scored slightly ahead of Raleigh-Durham in North Carolina.

Methodology

For this ranking, we compared the 100 largest office markets in the U.S. (by total office space square footage) across several indicators — office space lease rate, vacancy, the local coworking segment, pipeline activity, loan maturities, and online search interest for each location on the list. All individual ranking metrics are explained further below.

We based our analysis on commercial real estate data and research from CommercialEdge, CoworkingCafe, and Yardi Matrix, as well as analysis of Google search trends. For a fairer comparison, we divided the dataset into two groups and chose the cutoff threshold to be at 100 million square feet. Each group was then comparatively ranked separately. Furthermore, to account for the occasional percentage-value volatility in markets with low leasing activity, the final rankings include only those markets where the average asking lease rate was calculated based on at least 100 listings.

A certain number of maximum points was attributed to each metric. This total was evenly distributed between the lowest and the highest metric values in each of the two groups. On this scale, a score was calculated for each location based on its metric values. The factors (metrics or indicators) on which we based the composite scores are explained below.

For average vacancy rate and loan maturity rate, the number of points awarded was inversely proportional to the metric values. For all other indicators, the number of points awarded was directly proportional to the metric values.