U.S. Office Market Outlook – September 2024

Close to 35 million square feet of office saw completion year-to-date in August, according to the latest Yardi Matrix U.S. office market outlook.

Report Highlights

• The national office vacancy rate was 19.4 percent at the end of August, a 200-basis-point increase from the same time in 2023.
• National full-service equivalent listing rates averaged $32.78 per square foot in August, a 270-basis-point increase when compared to August 2023.
• The office under-construction pipeline continued to thaw, featuring 69.8 million square feet under construction as of August.
• Nationwide office transaction volume totaled $20.9 billion year-to-date in August.
• Office properties traded at an average of $173 per square foot.

Office vacancy soars in key life science markets

At the end of August, the national office vacancy rate hit 19.4 percent, marking a 200-basis-point increase from the same period in 2023. Vacancy rates have climbed in most markets, with sharp rises seen in leading life science hubs. The Bay Area experienced a 550-basis-point jump, followed by Boston (540 basis points), San Francisco (440 basis points) and San Diego (310 basis points).

While the surplus in life science spaces is partly responsible for the rise, many of these areas also have a high concentration of tech jobs, a sector that has faced its own difficulties over the past two years.

National full-service listing rates averaged $32.78 per square foot in August, showing a 270-basis-point increase from last year. Some of the markets with the highest average in-place rents include Manhattan ($68.56 per square foot), San Francisco ($66.93 per square foot), the Bay Area ($54.43 per square foot), Boston ($53.25 per square foot) and Miami ($51.25 per square foot).

Office investment surpasses $20 billion mark

The office construction pipeline continued to contract, with 69.8 million square feet under development as of August, accounting for just 1 percent of the total supply. Only 34.3 million square feet of office space had been completed by that time, making 2024 the slowest year for office deliveries since 2013. This decline is largely due to weakened demand and high capital costs. In 2023, office starts dropped to 30 million square feet, and this year new projects have nearly come to a standstill, with just 8.7 million square feet breaking ground.

In Boston, the active construction pipeline reached 11.3 million square feet, representing 4.4 percent of the city’s total office stock. Dallas followed with 4.9 million square feet under construction, or 1.7 percent of its stock. San Francisco and Austin trailed behind with 4.7 million and 4.3 million square feet in progress, accounting for 2.9 percent and 4.6 percent of their respective office inventories.

Office investment over the first eight months of 2024 totaled $20.9 billion, according to data from Yardi Matrix. The average sale price of office properties was $173 per square foot. Manhattan led the way in office investment, with $2.4 billion in total sales, followed by Washington, D.C., at $1.8 billion and the Bay Area at $1.3 billion.

Read the full Yardi Matrix Office Market Report: September 2024.