Office Market Report (March 2022)

Listing Rates Rise Amid Stagnating Office Vacancies

Although the national average vacancy rate continued to struggle, asking rates were actually up year-over-year.

Report Highlights

• Direct asking office rents averaged $38.62 per square foot in February, 1.2 percent higher from the same period last year.
• Office vacancy averaged 15.7 percent across the top 50 U.S. office markets, unchanged from the month prior.
• The active pipeline included 146.6 million square feet of office space under construction at the end of February.
• National office transaction volume totaled $12 billion at the end of February.

Office vacancy reached 15.7 percent in February, representing a 70 basis-point increase on a year-over-year basis, but remained unchanged from January. Vacancy rates decreased considerably in markets benefitting from domestic and business in-migration, such as Phoenix (down 280 basis points from February 2021) and Miami (down 270 basis points).

National office asking rates averaged $38.62 per square foot in February, accounting for a 120 basis-point increase year-over-year. The largest upticks in listing rates were present in Los Angeles (8.1 percent year-over-year increase) and Bay Area (6.2 percent). Meanwhile, Florida markets such as Tampa (6.2 percent) and Miami (5.8 percent) followed closely thanks to a rapidly expanding Class A office stock.

Shifting supply pipelines

Some 146.6 million square feet of office space was under construction across the nation at the end of February, accounting for 2.2 percent of existing stock. New construction rates fell behind office deliveries, decreasing by 10 million square feet throughout the last six months.

Roughly 15 percent of construction starts this year took place in Dallas or Austin, with activity being concentrated in Sun Belt markets and life science hubs. Meanwhile, gateway markets—Manhattan in particular—experienced a slowdown in construction activity: Only 2.1 million square feet of office space broke ground in the borough since the beginning of 2021, considerably less than the 5.7 million square feet started in 2020.

Read the full Matrix Office National Report-March 2022