Read the latest Yardi Matrix Office Market Outlook.
Lab space now constitutes a greater portion of the pipeline compared to the prior decade.
Report Highlights
- The average full-service equivalent listing rate was $37.83 per square foot at the end of February, a 1.2 percent decrease when compared to February 2023.
- Office vacancy reached 17.9 percent in February across the top 50 U.S. office markets, up 140 basis points year-over-year.
- The under-construction pipeline continued to diminish, featuring 94.2 million square feet of office space at the end of February.
- Nationwide office transaction volume totaled $3.6 billion during the first two months of 2024.
- Office assets changed hands at an average of $179 per square foot.
Surging office vacancy rates persist
As of the end of February, the national office vacancy rate stood at 17.9 percent, reflecting a 140 basis-point increase compared to the same period last year, according to Yardi Matrix data. The markets experiencing the most significant year-over-year increases in office vacancy were Detroit (1080 basis points), San Francisco (480 basis points), Denver (450 basis points), Seattle (430 basis points) and Dallas (430 basis points).
Meanwhile, the national average full-service equivalent listing rates in February averaged $37.83 per square foot, marking a 120 basis-point decrease year-over-year but 48 cents more than the previous month. Some of the markets with the highest increases in average in-place rent were Boston (21.5 percent year-over-year), Tampa (8.4 percent) and Miami (5.8 percent).
On the other hand, notable decreases in listing rates occurred San Francisco (11.1 percent), Charlotte (10.8 percent), Portland (8.2 percent) and the Bay Area (5.2 percent).
Washington, D.C., leads the way in office investment
The under-construction pipeline continues to dwindle, as Yardi Matrix reports 94.2 million square feet of new office space in development as of February, making up 1.4 percent of the total stock. Despite a slowdown in venture capital funding for life science companies and softened demand, lab space development remains robust. Leading the charge in pipeline growth is Boston, boasting a 14.5 million-square-foot pipeline largely driven by new lab space projects.
In San Diego, the active pipeline hovers just above 5 million square feet, constituting 5.3 percent of the total stock. Nashville, Tenn., follows closely behind with 2.7 million square feet of office space underway, equivalent to 4.7 percent of the stock. Meanwhile, San Francisco and Seattle collectively account for around 5.8 million square feet of office space under construction, representing 3.6 and 4.1 percent of the stock, respectively.
Office investment in the first two months of 2024 reached $3.6 billion, with an average sale price of $179 per square foot. Washington, D.C., takes the lead in office investment, totaling $429 million. Bay Area came in second with $416 million in office investment, followed by San Diego ($142 million), Seattle ($139 million), Dallas ($137 million) and Twin Cities ($135 million).
Read the full Matrix Office National Report-March 2024.
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