Read the latest Yardi Matrix Office Market Outlook.
Pandemic impacts and rising interest rates drive a steep 25 percent average decline in office property values, the Yardi Matrix report shows.
Report Highlights
- The average full-service equivalent listing rate was $37.35 per square foot at the end of January, a 1.3 percent decrease when compared to January 2023.
- Office vacancy reached 18.0 percent in January across the top 50 U.S. office markets, up 130 basis year-over-year.
- The under-construction pipeline continued to diminish, featuring 97.2 million square feet of office space as of January.
- Nationwide office transaction volume totaled $1.5 throughout the first month of 2024.
- Office assets changed hands at an average of $195 per square foot.
Remote work continues to boost vacancy rates
At the end of January, the office vacancy rate hit 18.0 percent, up by 130 basis points from the previous year. The largest increases were observed in cities with many remote workers, including San Francisco (up 490 basis points), Denver (390 basis points), Seattle (450 basis points) and San Diego (310 basis points), as reported by Yardi Matrix in the latest US office market outlook.
Meanwhile, national full-service equivalent rent prices averaged $37.35 per square foot, a decrease of 180 basis points when compared to the same time last year and down 29 cents from the month before. The most significant rent increases were seen in New Jersey (5.4 percent), Tampa, Fla., (5.1 percent), Atlanta (3.6 percent), Detroit (1.9 percent) and Denver, Colo. (1.5 percent).
Life science propels office development
As of January, the under-construction pipeline included 97.2 million square feet of office space, making up 1.4 percent of total stock, according to Yardi Matrix. Despite a general decline in office construction post-pandemic, life science developments have become a more prominent part of office construction. In 2023, 27.8 percent of office project beginnings were in life sciences, a noticeable increase from 7.3 percent in 2019.
Boston led the way in terms of office construction, with 14.4 million square feet underway as of January, representing 5.8 percent of total stock. Austin and San Diego had 4.9 million square feet of office space under construction, accounting for 5.3 and 5.2 percent of stock, respectively. Nashville came in fourth with 2.7 million square feet underway, accounting for 4.7 percent of total stock.
Office investment throughout the first month of 2024 reached $1.5 billion, with the average sale price standing at $195 per square foot. Transaction activity was concentrated in the Bay Area ($259 million), San Diego ($142 million), Austin ($112 million), Dallas ($109 million) and New Jersey ($104 million).
Read the full Matrix Office National Report-February 2024.
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