The NAIOP Office Space Demand Forecast reports that the U.S. office market has had a solid net absorption level in 2018 of 18 million feet and 11 million square feet in the second and third quarters. This massive amount of leasing is due to economic growth and demand from office-using jobs.
“The economy has been very strong, growing at annualized rates above 3% for much of 2018 and many office using sectors, such as professional and business services, have seen employment growth at rates as much as 50% higher than the general rate of job growth,” says Joshua A. Harris, Academic Director and Clinical Assistant Professor of Real Estate at the Schack Institute of Real Estate. “Furthermore, co-working firms are also aggressively leasing space and starting to really drive down vacancy is some submarkets.”
But this growth is limited, with the Bureau of Labor Statistics reporting more open positions and not enough qualified, unemployed workers for the first time in U.S. history. Factors like the opioid epidemic are hurting the labor force as well.
A big portion of office leasing comes from the technology and media sectors. Companies like Google and Facebook are slowly expanding their square footage, and many service firms are leasing new spaces. However, they are seeking for denser spaces.
Creative sectors and coworking spaces are also big players in office space leasing and have begun branching outside of major cities.
“We think the economy will remain stable and growing for 2019, thus office net absorption should continue,” explains Harris. “Further, since many businesses have expanded sales without adding much office space, there comes a breaking point where the firm must expand facilities to keep growing.”
