U.S. Office Market Report (December 2021)

Average Office Sale Prices Set a New Record

Report Highlights

• Direct asking office rents averaged $38.62 per square foot in November, unchanged from the previous month and 1.2 percent higher from the same period last year.
• Office vacancy declined by 40 basis points over the last six months, averaging 15.2 percent across the top 50 U.S. office markets.
• Office-using employment continues to rebound, albeit unevenly across markets and sectors.
• National office transaction volume totaled $68.8 billion in November.

Office investment volume totaled $68.8 billion year-to-date in November, up 11 percent compared to the same period in 2020. The average sale price per square foot reached an all-time high this year ($291 per square foot), with markets such as Manhattan ($1,267 per square foot), San Francisco ($666 per square foot) and Brooklyn ($661 per square foot) leading the way.

Stabilizing vacancy, listing rates

National office asking rates stagnated, averaging $36.82 per square foot but increasing by 120 basis points on a year-over-year basis. Meanwhile, office vacancy clocked in at 15.2 percent, 40 basis points lower than in May but up 140 basis points year-over-year in November.

Most markets followed the same pattern, recording slight decreases in vacancy throughout the last six months, but recording larger gains on a year-over-year basis thanks to deliveries of new office stock. As an example, vacancy in Seattle increased by 630 basis points since November 2020 but decreased by 70 basis points in the last six months.

Development slowing down

Some 152.8 million square feet of office space was under construction across the nation as of November, and the active pipeline contracted by 12 million square feet since January. Only 48.2 million square feet of office space broke ground year-to-date in November, an 18 percent decrease from the 58.9 million of new construction starts in 2020 and far less than the 86 million started in 2020.

Markets such as Austin (10.9 percent) and Nashville (8.1 percent) had the largest active pipeline as a percentage of existing stock. Meanwhile, development activity slowed down in other markets including Charlotte, largely due to developers’ cautious wait-and-see approach.

Read the full Matrix Office National Report-December 2021