Office occupancy figures in the U.S. have been slowly rising but are still well below pre-pandemic numbers. But experts at CBRE believe worries around worsening economic conditions are keeping occupancy numbers from rising more, and once economic weakness passes, the industry can expect a rebound. In CBRE’s Midyear Global Real Estate Market Outlook 2023, leaders in the brokerages office division discussed the office market and occupancy trends in Europe, Asia-Pacific, and the U.S. and what they see for the sector moving forward. The flight-to-quality that has been much discussed over the last year is alive and well in the U.S., with the vacancy rate in the office market’s youngest building about 400 basis points below the overall average. “Rents have been buoyed by the prime office market, and that prime office market has been very resilient throughout the pandemic and into this year,” said Julie Whelan, Global Head of Occupier Thought Leadership.
CBRE leaders also discussed how there is more variability in how companies are using offices in the U.S., with many pushing harder for in-person work while others leaning into remote work, while in Europe, most companies are implementing a balanced hybrid approach. The concern over shaky market conditions will likely continue until things are a little more clear from an economic perspective. Many are expecting office demand to pick back up in late 2024, both in the U.S. and in Europe.
In the meantime, we are getting a better idea of how commercial real estate brokerages are faring with the recent second quarter earnings report releases. So far, JLL, Cushman & Wakefield, and Marcus & Millichap all reported significant drops in profit during the second quarter of the year. The results are being attributed to a slowdown in deal volume due to the higher cost of capital, stricter lending standards, and price uncertainty. Until the markets begin to rebound like experts are predicting, we’ll likely see slow movement on office occupancy numbers and, among the major brokerage firms, a lot more cost cutting measures.