U.S. Office Market Outlook – June 2023

Read the latest Yardi Matrix Office Market Outlook.

Nationwide office vacancy was 17.0 percent at the end of May and rates climbed rapidly in tech markets, according to the latest Yardi Matrix national office report.

Report Highlights

• The average full-service equivalent listing rate was $38.36 per square foot at the end of May, a 2.1 percent increase when compared to May 2022.
• Office vacancy continued to rise, reaching 17.0 percent in May across the top 50 U.S. office markets, up 160 basis points from May 2022.
• The under-construction pipeline totaled 116.2 million square feet of office space at the end of May.
• Nationwide office transaction volume totaled $11.9 billion year-to-date in May.

Remote work impacts office vacancy

Office vacancy nationwide reached 17.0 percent in May, up 30 basis points when compared to the previous month and 160 basis points more than in May 2022. The highest rates were recorded in markets with a high concentration of remote worker and predominantly in tech-centric markets such as Denver (20.2 percent), San Francisco (20.0 percent), Seattle (19.5 percent) and Twin Cities (16.9 percent).

National average full-service equivalent listing rates clocked in at $38.36 per square foot at the end of May, increasing by 210 basis points from May 2022 and 13 cents more than April 2023 rates. The largest gains in asking rates year-over-year were present in San Diego (16.6 percent), Philadelphia (8.5 percent), Boston (7.7 percent) and New Jersey (7.3 percent). On the other side of the spectrum, Brooklyn and Charlotte recorded the steepest declines, with a 7.6 percent decrease each.

Office investment shifts amid construction contraction

Office transaction volume totaled $11.9 billion at the end of May, and the average price per square foot decreased 22 percent from $250 per square foot in 2022 to $195 as of May 2023. Office investment was concentrated in gateway markets such as Manhattan ($1.1 billion), Los Angeles ($1 billion) and Boston ($756 million), as well as New Jersey ($827 million), Washington, D.C., ($609 million) and Chicago ($588 million).

Nationwide, the under-construction pipeline continued to further contract, encapsulating 116.2 million square feet of office space under construction at the end of May, or 1.8 percent of total stock. The largest pipeline on a percentage of stock basis was found in Austin (7.2 million square feet underway, 8.1 percent of stock), Boston (15.1 million, 6.3 percent), Nashville (3.4 million, 5.9 percent), San Diego (4.9 million, 5.3 percent), San Francisco (7.9 million, 5.2 percent) and Seattle (6.8 million, 5.0 percent).

Read the full Matrix Office National Report-June 2023.