Demand for Office Space Rose in the Second Quarter

By Holly Dutton

Office leasing jumped in the second quarter of this year across the country, amid an environment of high interest rates and rising vacancy. Leasing rose 7.7 percent in the second quarter from the previous three months of the year, according to new data from JLL. In total, 40.4 million square feet was leased in the second quarter, an increase from the first quarter but down 14 percent from the same time period last year. The figure is also still well below pre-pandemic averages. JLL attributed the rebound in leasing to more demand for space from expanding industries, like energy companies in Texas, as well as more large occupiers inking deals for new space. More office tenants were looking for spaces larger than 100,000 square feet, while at the same time, more space came up for rent in the second quarter, which pushed the average vacancy rate up to close to 21 percent. 

The uptick in leasing is welcome news for the office market, which has faced numerous struggles over the past few years. Office occupancy has also been trending up, albeit slowly, but like office leasing, is still well below pre-pandemic averages. Office building sales have fared even worse. As of May of this year, total office sales in the U.S. reached $9.4 billion, a significant drop in activity compared to the first quarter of 2022, when sales volume exceeded $20 billion. However, not all markets are performing poorly. In Miami, which has boomed in recent years as companies and workers relocated to the city, asking rents increased 7.3 percent in the second quarter, according to JLL. In New York, sublease space dropped in the second quarter. We’ll likely continue to see office markets struggle with higher vacancy rates and sluggish leasing, but bright spots like the rise in leasing in the second quarter, while not a huge development in the grand scheme of things, bode well for the future.

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