Following a rapid expansion in recent years fueled by an abundance of capital and a deep talent pool, the tech sector has begun to scale back, according to the latest monthly national office market report by CommercialEdge. Over the last two quarters, tech companies such as Meta, Twitter, Amazon and Uber have been laying workers off, all while downsizing their office footprints.
The tech slowdown is just another challenge for an already troubled office sector. However, industry titans including Apple and Twitter announced return-to-office orders for their employees, and many tech firms rejected fully remote work.
The activity within the office-using sector has cooled down, adding 39,000 new jobs in October. After a strong start of the year, growth in the three office sectors has slowed in recent months. Between January and July, some 108,000 office jobs were added per month. From August to October, the average was slightly higher than 41,000 new positions. While Sun Belt markets have long since recovered and kept expanding in 2022, gateway markets just recently surpassed employment levels from February 2020.
National average full-service equivalent listing rates averaged $38.06 per square foot at the end of November, up by 12 cents over the previous month but decreasing by 310 basis points year-over-year. CommercialEdge shows that asking rates had double-digit increases in Sun Belt markets such as Charlotte (13.4 percent), Orlando (11.8 percent) and Miami (11.6 percent), followed closely by San Diego (9.5 percent).
Meanwhile, the national office vacancy rate was 16.2 percent in November, up 110 basis points from the same time last year. While office vacancies recorded upticks in most markets surveyed by CommercialEdge, Sun Belt markets—especially Florida metros—outperformed the rest of the country. Tampa led the way in this aspect, with a 420 basis-point decrease year-over-year, alongside Miami (270 basis points) and Orlando (80 basis points).
New-supply pipeline still substantial
The country’s under-construction pipeline included 132.3 million square feet of office space at the end of November, accounting for 2.1 percent of total stock, according to the CommercialEdge office report. Despite ongoing economic hurdles, year-to-date construction starts (56 million square feet through November) are expected to surpass last year’s 58.2 million square feet in new office groundbreakings.
Austin led the way in terms of office construction activity (7.7 million square feet underway, 8.8 percent of stock), followed by Charlotte (4.9 million, 6.5 percent), Boston (13.4 million, 5.6 percent), Nashville (3 million, 5.5 percent) and San Diego (4.5 million, 4.9 percent).
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