Office commercial real estate tenants are currently touring buildings at the highest rate since the beginning of the COVID-19 pandemic, which could be a sign that businesses are ready to work onsite again and sign leases, The Real Deal reports. That’s the good news—the bad news is the touring rates are still well below what they were prior to the pandemic.
Tenants across the U.S. have increased their tour activity every month since December, per CRE data from VTS. Tour activity is monitored as is its an early sign of demand to lease new office space. Boston, Chicago, New York, Los Angeles, San Francisco, Seattle and Washington, D.C.’s office markets are tracked in this report.
“Though still depressed versus pre-COVID times, the slow recovery of office demand both nationally and in individual markets featured in the (study) correlates incredibly well with leasing activity,” VTS’ Ryan Masiello told The Real Deal. “One cannot occur without the other.”
In-person and virtual tours increased 235% in August from where they were during the same time in 2020, according to VTS’s data. The spike does not come as much of a surprise because August 2020 was not long after the second phase of reopening occurred and brokers could conduct in-person tours.
Touring activity remains far below normal when compared to pre-COVID levels, however. Nationally, tours were approximately 87% of where they were on average through 2018 and 2019, per VTS’ data, The Real Deal reports. There’s also potential that number is slightly inflated because of temporary spikes in areas like Chicago and Seattle. Office touring activity in Chicago increased 10% in August from where it was pre-COVID. Meanwhile, Seattle’s activity went up 4% during that time. Neither city could maintain those activity figures, however.
Masiello noted there’s typically a three to six-month gap between when a tenant initially enters a market to tour an office and actually signs the lease. VTS’ data showed the average tenant seeks about 7,000 square feet of space.
Other markets’ office tour performance levels
There were cities like Washington, D.C. that saw their tour activity fall well below their pre-pandemic levels, The Real Deal reports. The nation’s capital’s activity dropped 57% of what it was pre-COVID, while San Francisco was at 63% Boston’s office space touring activity was 65% of where it was during the two-year timeframe before 2020.
Meanwhile, New York City and Los Angeles were closer to normal. The cities’ activity in August was at 96 and 97 percent, respectively, of its pre-pandemic levels.
Masiello said each market has its own issues. Chicago and Seattle, for example, had some “pent up” demand with large tenants going on tours in August. Meanwhile, Washington experienced a seasonal summer slowdown and lighter demand from government and non-profit tenants. Boston meanwhile might have a tough time getting back to the strong showing it had in 2018.
“Focusing on the trendline itself can be helpful when comparing here,” Masiello told The Real Deal, rather than focusing on the comparison to pre-pandemic activity.
Joe Dyton can be reached at firstname.lastname@example.org.