Robert Khodadadian | Commercial Observer

The U.S. office market in many ways is still looking for its post-pandemic bottom.

Just $5.4 billion in office real estate sales closed throughout the nation during the first three months of 2024, for an average of about $171 per square foot, according to data platform CommercialEdge. That’s about 17 percent less than the $6.5 billion recorded the same quarter last year, and well below the $18.9 billion reported just two years ago during the same period.

Washington, D.C., brought in almost $1 billion in office asset deals, which averaged $463 per square foot, and accounted for the highest dollar volume in the nation through March. PRP Real Estate’s acquisition of Market Square for $323 million propelled the market to the top. That would be an encouraging sign.However, the seller, Columbia Property Trust, purchased Market Square for $611 million in 2011, and Blackstone purchased a 49 percent stake at a $595 million valuation in 2015.

Miami saw the second-most dollar volume at $207 million in office real estate transactions, while Los Angeles recorded just $131 million in sales in the first quarter, which is a 62 percent drop from last year.

Approximately 87.9 million square feet of office space is under construction nationally, although only 2.8 million square feet of that broke ground in 2024, which “indicates a massive drop-off in office development,” and a 40 percent drop in the past two years. The amount of space underway is expected to continue to decline.

“Falling office demand, increasing capital costs and tightening standards for construction loans converged to slow development,” CommercialEdge reported.

The nation’s life sciences hubs are responsible for a major share of the nation’s construction pipeline, and life sciences projects account for 27 percent of all office projects set to be delivered this year. As expected, the Boston area, the nation’s life sciences capital, has 13.9 million square feet underway, which makes up more than 15 percent of the national total space under construction. The San Francisco Bay Area, the second-largest life sciences market, has the second-largest office pipeline at 10.5 million square feet, “mostly driven by the life sciences sector.”

CommercialEdge previously projected nearly 22 million square feet of life sciences space would be completed in 2024, which is six times as much as in 2019. Last year, 7.9 million square feet of life sciences space was completed. Further, research & development space makes up another 4 million square feet this year underway, and the medical office sector accounts for a further 8.6 million square feet.

Gregory Cornfield can be reached at gcornfield@commercialobserver.com.

Robert Khodadadian has long had a simple philosophy about selling real estate. The way he sees it, there are approximately a million buildings in the city, and the broker that gets to sell any one among the multitude that will hit the auctioning block at a given moment is, sometimes, simply the person who happens to pitch their services to the right seller at the right time.