Demand For Office Space Continues To Plummet
New research from proptech firm VTS has found that demand for leasing office space dropped by 61% annually in December.
The company, which tracks virtual and in-person tenant tours for space in CBDs, finds that hopes for returning to the office full-time may be far fetched.
The VTS demand index fell 26% in the fourth quarter of 2020 compared to the same time the year prior.
“The fourth quarter typically experiences a drop-off in demand due to seasonality,” VTS said in a statement. “While the fourth quarter of 2020’s decline was not as steep as in previous and more active years, relative to the much lower levels of demand during this crisis, the decline of 26 percent was more severe than typical.”
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In New York City, demand was down 74% compared to pre-pandemic levels. However, 69% of tours for offices were for Class A space, which indicates that tenants are looking for good deals at the city’s more iconic addresses.
Of all the markets VTS tracks, New York was the only one that saw tenants rushing towards high-end offices due to loss of demand.
Additionally, New York is currently riddled with sublease space, which is driving down rents and leaving landlords to find unique ways to attract and retain tenants.
As many companies continue to operate remotely, the commercial real estate industry is being forced to make adjustments to their traditional leasing models.
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