Q2 2022 U.S. office market overview
Inconsistent office usage impairs demand
The U.S. office sector enters the second half of 2022 in precarious conditions. Offices across the country remain sparsely utilized despite a nearly full recovery in air travel, hotel bookings and restaurant dining. The adoption of hybrid work has drawn daytime activity out of central business districts, creating a void that’s been exacerbated by a rise in crime in many cities.
Employees in most industry segments are gradually returning to offices, yet inconsistently, with the majority of employers embracing flexible and hybrid work schedules, deferring to employees who still have the upper hand. Based on Avison Young’s proprietary “AVANT Vitality Index” analysis of weekly mobility data, 41.9% of weekday foot traffic has returned to office buildings across the U.S. relative to the week preceding the pandemic, up from 27.7% one year ago. That said, the index demonstrates a substantial gap between cities like New York driven by banking and finance leading at 53.4% and markets like Silicon Valley driven by big tech substantially lagging at 36.8%.
With office usage well below pre-pandemic rates, it’s no surprise that leasing activity remains subdued, causing vacancy to rise further. Investors are assessing opportunities to reinvent the abandoned office towers least likely to recover from an enduring shift to working from home.
Under construction inventory
Tenant occupancy loss in older second-generation space accelerated, driving total net absorption into negative territory. New vacant sublease listings outweighed completed sublease deals. However, occupancy gains in new inventory boosted direct net absorption into positive territory.
Concessions (TI allowance)
Average sale price
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U.S. employment overview: tracking trends in real-time
The U.S. economy continues to outpace job projections and is showing growth across many sectors. However, job openings, inflation, and efforts to stem it are areas of concern heading further into 2022.
May 2022 jobs numbers continued to beat consensus projections, with the economy adding 390,000 jobs compared to the 328,000 projected by economists. However, this is the first time in many months that job adds have dipped below 400,000. The top two sectors were Leisure and Hospitality and Professional and Business Services, which added 84,000 and 75,000 new jobs, respectively. Across major metropolitan areas, more than half now have more jobs than they did pre-pandemic.
Office Vitality Index
The Vitality Index offers owners and occupiers a dynamic look at recovery trends and daily foot traffic estimates in 20+ different metros across North America. It allows easy, real-time access to comparisons to pre-pandemic levels.