Q1 2024 U.S. office market overview

As a result of quarter-over-quarter increases since Q4 2022, direct available office space in the U.S. reached a decades-long high of 1 billion square feet (bsf). This figure increased from 995.8 million square feet (msf) in Q4 2023 and caused the direct availability rate to increase from 19.7% to 20%. Despite the record high direct available space, sublet available space reached its lowest value since Q4 2022. The inversion of these trends can be linked to an increase in occupiers’ need for flexibility, drawing them towards signing subleases.

Through Q1 2024, U.S. office leasing activity reached 52.2 msf—falling 36.1% below the pre-COVID average (2000-2019) for Q1 leasing and 32.1% below Q1 2023. In the same vein, only 36 office leases over 100,000 sf were signed this quarter, compared to 67 leases in Q1 2023. The slowdown in large block leasing is likely a symptom of large occupiers’ hesitancy to commit to long term occupancy strategies. Return-to-work policies are starting to finalize and will soon provide occupiers with a better understanding of their space needs, which should provide a boost to leasing activity in the second half of the year.

As of Q1 2024, trophy properties are significantly outperforming the other asset classes across U.S. gateway markets in terms of average lease term lengths. Currently at 110 months, average trophy lease term lengths sit 27.1% longer than the overall average of 87 months. Seemingly a function of flight-to-quality, in addition to large concession offerings, occupiers are willing to sign longer lease terms in high quality product more so than in average product. This trend will likely continue to occur in the coming quarters.