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Office Markets Continue to Slow in 2023

For many employers wanting to migrate their staff back into the office, recent Q1 office market reports from major commercial real estate companies show the effects of the pandemic are quite present.

Office vacancy is still prevalent as 20.2 percent of U.S. offices are empty, according to Jones Lang Lasalle Inc. (JLL) Q1 Office Outlook. As well, JLL reports a vacancy rate of 20.8 percent for the Kansas City area.

JLL’s report also shows U.S. office leasing volume fell to 38.5 million square feet in the first in Q1 of 2023. Furthermore, U.S. office leasing volume fell 10.7% in Q1.

Other commercial real estate companies such as CBRE Group Inc. reported a 17.8 percent vacancy rate and a slightly larger 18.6 percent, according to Cushman & Wakefield PLC.

More key takeaways:

  • Bank failures raised concerns over capital availability and thus tightened credit.
  • Occupancy losses continue to grow, however, the impact is felt primarily among older commodity assets.
  • The national rent amounts continue to grow, reaching $38.96 per square foot in Q1 resulting in an increase of 0.3% since Q4.