Q4 2023 U.S. office market overview

Occupiers continued to navigate their real estate needs through year-end 2023, as embodied by slowed lease transaction volume and heightened renewal activity. Despite the below-average leasing activity, available sublease space has declined to its lowest level since Q1 2023. The dip in available sublease can largely be attributed to a handful of factors – notably the demand for high-end, built sublease space.
+26%

Increase in trophy share of subleasing, pre-COVID to 2023

From the beginning of 2018 until the onset of the pandemic in March 2020, trophy subleases represented 21.9% of sublease activity by square footage in major U.S. office markets. In 2023, however, trophy subleases represented 27.6% of all sublease activity — reflecting a 26% increase. In 2023, trophy and class A subleases together constituted 71.8% of all subleasing activity, as occupiers actively sought high-end and built sublease spaces. As a result, available sublease space has declined.

23.4%

Renewals as a share of 2023 leasing activity

In 2023, renewals accounted for nearly a quarter of total leasing activity by square footage in major U.S. office markets – at 23.4%. This figure has increased year-over-year since 2021, largely due to lingering uncertainty relating to return-to-office strategies. Many large occupiers are continuing to delay committing to a long-term occupancy strategy as return-to-office efforts gradually normalize. As more companies finalize their long-term return-to-office plans, office demand will likely rise - likely towards the back half of 2024.

3.6%

Offices encumbered by distressed loans

Despite a low percentage of office properties considered “in distress”, only 3.6% ($33.7B) of fixed-rate office loans are maturing through 2025, indicating that distress is likely to mount and potentially tip the scale by 2025 – dependent on monetary policy in the upcoming year. Over 50% of these distressed loans are secured by class A office properties with an average direct availability rate of 22.3% – the highest of all asset classes – which can be seen as a sign of distress in the current office climate.

For more information, contact:

  • Regional Manager, Market Intelligence
  • Market Intelligence

Subscribe to receive national office market reports and insights

Local office market reports

Get office market trends, data and insights for your commercial real estate market.