Full-service equivalent listing rates for office space were up 1.8% year-over-year (Y-o-Y) in December across the top 50 U.S. markets, according to a new report by CommercialEdge.com.
As of last month, national rates rested at $38.44 per square foot, although rates in top markets were up considerably more. For instance, the average rent for Phoenix office space rose to $30.01 per square foot — an increase of 9.5% Y-o-Y. Similarly, the lease rates in the Atlanta and Tampa, Fla., markets also picked up the pace, accelerating 8.1% and 7.9%, respectively, to settle at $29.21 per square foot in Atlanta and $30.90 per square foot in Tampa.
While leasing rates are slowly picking up across the country, sales volumes in central business districts (CBD) have stagnated: The average sale price for CBD properties has fallen 19% since the beginning of the pandemic and currently stands at $323 per square foot. However, office prices in urban areas outside of the CBD continue to rise, increasing 28% since the pandemic began. Overall, the sales volume for December came in at $77 billion or $293 per square foot.
Meanwhile, office construction looks to be returning to the trendline it was on prior to the pandemic. Projects in 2021 were mostly concentrated in the urban and CBD areas at 48.6% and 21.1%, respectively. However, the planned pipeline is signaling a resurgence in suburban office development. Specifically, the share of planned developments in suburban areas increased to 48% of planned office projects — up from 35% two years ago.
On an individual market level, Austin office space construction is leading the nation with 10.6% of its total inventory in the construction pipeline. Not far behind, the office construction pipelines in Nashville, Tenn., and Brooklyn, N.Y., follow with 8% and 5.2% of their respective inventories currently in the pipeline.
Notably, December vacancy rates also stagnated at the national level, settling at 15.5% (an increase of 130 basis points Y-o-Y) and leveling out after some volatility in 2021. In particular, Boston office space had the lowest vacancy rate in the country at 10.3%, followed by Miami at 12.5% and Los Angeles office space at 13.2%.
Visit the CommercialEdge blog for the full January national office report, including industry and economic recovery fundamentals, as well as notes on the latest office market trends.
