A recent report from Green Street has revealed that decreased job growth and increase in interest rates could contribute to the struggling office market.
Although many analysts have pointed to remote working as the culprit for skyrocketing vacancies, the report finds that other factors are also playing a role.
The report indicates that the decrease in office-focused jobs, as well as a slowdown in the technology, advertising, media and information industries has decreased office demand.
Additionally, advancements in Fintech have caused demand for financial services office space to fall off.
Even more, the growing trend of increased space efficiencies is predicted to go on for longer than previously anticipated. This will likely reduce net absorption rates.
The report also finds that the increase in real interest rates could hurt the value of the office sector, particularly as long-term leases are seen as less effective.
It added that if supply grows quicker than expected, rent growth will slow down. However, the uncertainty of the pandemic has left the future of the market in limbo.
This trend has been similarly outlined in a recent JLL report, which found companies are taking a wait-and-see approach when it comes to future leasing strategies.