New Report: Overall Gains in Office Demand Following Short-term Challenges

Nov

Originally published on behalf of NAIOP Research Foundation on November 19, 2020.

Negative Absorption of Office Space Expected to Continue in Short Term, Trend Positive Beginning Q2 2021

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2020.

Key Takeaways:

Given the continued challenges facing the U.S. economy, office net absorption is forecast to be negative 18 million square feet in Q4 2020 and negative 10 million square feet in Q1 2021.
Growth in net absorption is forecast to resume in Q2 2021, and the total net absorption over the period from Q2 2021 to Q3 2022 will exceed negative absorption from the recession, resulting in overall gains in absorption over the next two years.
The largest office-using industries have been more insulated from the effects of the pandemic than the economy as a whole, but their shift to remote-work arrangements has diminished demand for office space.
Multiyear lease terms have mitigated the effects of reduced occupancy on vacancy rates, which have risen to 14% in the third quarter. Vacancy rates are likely to continue to rise through the end of 2020 as more leases come up for renewal.