Bond credit rating company Moody’s Analytics report is predicting that effective office rent in the U.S. will decline by 7.5% this year and may not rebound to pre-pandemic levels until 2026.
Although the global commercial real estate economy is eager to bounce back from the tumultuous year of 2020, this grim outlook could mean that the worst of the pandemic’s impact is still yet to come.
Average effective office rents include concessions made by landlords, which are not reflected in asking rents. According to Moody’s, this figure fell by 0.7% in 2020, which could be indicative of the long-term nature of many office leases.
However, JLL’s recent report also stated that average asking rents stayed relatively steady despite many people working from home.
Occupancy levels are one of the big signals of the struggles that the office market has faced. The U.S. marked a record 80.4 million square feet of negative net absorption according to JLL. This could continue to be jeopardized as remote working becomes more widely adopted and demand for office space decreases.
Because of this, landlords will need to find creative ways of filling out their buildings and work alongside tenants to navigate deals that help both parties.