Q1 2023 U.S. office market overview

Leasing activity took a step back in early 2023, dipping to -42.2% of pre-COVID and -27.5% of post-COVID levels, as banking failures, liquidity concerns and economic headwinds took center stage. Still, high-quality offices—such as those that offer superior sustainability—have continued to outperform the broader market. Demand is poised to rise, but is unlikely to meet pre-pandemic levels, as return-to-office efforts come to fruition, space utilization strategies get realized and tenant-favorable market conditions predominantly persist.

Q1 2023 leasing activity vs. 2001-Q1 2020 quarterly leasing activity

Mounting financial services disruption, highlighted by the collapse of Silicon Valley Bank and several banking acquisitions, contributed to the second-weakest quarter in terms of leasing activity since 2001. Leasing activity is poised to rise as 2023 progresses—but is still unexpected to approach pre-COVID levels—as tenants capitalize on greater leverage and space utilization strategies come to realization.


Post-COVID Trophy net effective rents in Manhattan

Tenants seeking new construction and other high-quality assets in select gateway markets need to execute or risk being boxed out by other requirements.

Potential at-risk office loans maturing by 2025

Continued office foreclosures, particularly properties encumbered by fixed-rate loans originated before 2021, are expected in the near term, including dispositions by institutional landlords with assets in gateway markets, as debt burdens rise while cash flows decline.
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