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Subleasing, Rent Pressures Equal Trouble for Office

Colliers’ Phoenix office market snapshot. Credit: Colliers International

By Rayna Katz for GlobeSt.com 

Given corporate America’s reluctance to return to offices rather than work from home, current conditions in office properties—and the likely near-term future—are looking bleak. Looming excess supply on the horizon will also be a problem, according to a new report on the top 25 US Office Markets from Colliers International. 

All told, the mid-year research stated, “net absorption fell into negative territory for the first time in 10 years, while vacancy posted its largest quarterly increase over a similar timeframe.” Further, Colliers noted, while the office sector’s performance certainly disappointed in the second quarter, the “true test” will be the latter part of 2020. “It may take several quarters, and multiple phases of reopening, before firms can fully assess their space needs.” 

Meanwhile, the report continued, two troubling trends have clearly emerged. Sublease space is becoming more available, and additional inventory will come online in the next six months to a year. Additionally, rents are poised to decline. While asking rates mostly are holding up, Colliers said, “market conditions suggest that reductions may be on the way. Rising vacancy and a dearth of demand are creating the climate for a downturn.” 

Read more at GlobeSt.com. 

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