We are happy to report that office rental rates are stabilizing as leasing rates are slowly picking up! Office space is a huge sector in the commercial real estate world, and one that took a hit as a result of the pandemic. Although, as of now, leasing and vacancy rates are returning back to normal and stabilizing.
Rates Stabilizing
Overall, office asking rates are up 1.2% annually (year-over-year) with a national average of $40 per square foot lease rate. Additionally, lease rates are also seeing some improvements, having dipped 10 cents in August. These rates have remained stable for the past 4 months, making us think the worst is behind us.
Vacancy rates are less than 15% right now across the top 50 markets in the country. This rate decreased 50 basis points from August to September alone. Markets such as Austin, San Francisco and Seattle have some of the highest vacancy rates as of now.
Office sales in the U.S. have already exceeded $50 billion this year. This rate is expected to continue, surpassing the $61.8 billion record that was set in 2020. The national average sales price of office space this year as of September is at $295 per square foot This number is different depending on the city.
As of this September, about 158 million square feet of new office space was under construction across the U.S. Many of these are projects that were started before the pandemic, with only 36 million square feet beginning construction at the beginning of the year, which is lower than the normal yearly average. Overall, the pipeline of properties under-construction has plateaued at 2.4% of office supply total.
Reasoning
As mentioned before, the pandemic took a big toll on office rental rates. Many people began working from home temporarily, and many companies switched to permanently working from home. As covid cases decrease and more people receive the vaccine, more people are ready to get back to work. Additionally, in efforts to attract new tenants, landlords have been offering attractive concessions and amenities to new tenants. This also helps with increasing lease rates and filling up office space.
If you have any questions about leasing or selling office space in the Southeastern North Carolina region, don’t hesitate to reach out to us! We would love to help you through the process.
Many of these statistics were gathered from the Commercial Edge National Office Report from October of this year.