Signs of commercial real estate office space recovery are appearing in various parts of the United States, according to data from CBRE and the National Association of Realtors, (NAR), GlobeSt reports. The life sciences sector helped push Boston to the U.S.’s leading city in terms of pandemic-era office market performance as well as recovery for office space demand, per CBRE’s monthly “Pulse of U.S. Office Demand” report for August.
“Demand for office space remained stable (in August) with life sciences tenants playing a major role,” CBRE Senior Director of Research and Analysis Nicole LaRusso said. “Despite a resurgence in new Covid infections, Boston was still the top-performing market in the country, something we believe will continue for the remainder of 2021.”
Meanwhile, Florida (Daytona Beach, Miami, Palm Beach) and Texas (Austin, San Antonio) comprised half of NAR’S best performing CRE office markets. Boise, Chattanooga, Myrtle Beach, Omaha and Provo rounding out the list.
CRE office space workers remain in short supply
NAR’s analysis saw strong recovery with positive net absorption and strengthening rents throughout the multi-family, industrial and retail property markets as economic production bounces back to pre-COVID levels, GlobeSt reports. Meanwhile, apartment and industrial CRE spaces have reported historically low vacancy rates. Retail locations recovery hasn’t been as robust as its CRE counterparts, but people are starting to shop in-store again.
News hasn’t been as good for the office sector, however. Both absorption rates and rents have gone down and a lot of the occupied office spaces don’t have many workers, according to NAR. Offices in small to medium-sized metropolitan areas have had better luck, as their occupancy rates have outperformed those in large cities, as well as the national average.
“Even as the economy makes a steady recovery, the one sector still lagging behind has been the office market,” said NAR Chief Economist Lawrence Yun. “Work-from-home flexibility looks to be the defining shift of the new post-pandemic economy. Despite the overall challenges, however, some local markets are bucking the trend with more office occupancy and rising rents. A combination of strong in-migration and relatively lower cost of doing business is driving these growth markets.”
“As of August, the resurgent COVID-19 virus has had only a mild impact on office demand,” CBRE said in its report. “While COVID likely will continue to hamper the office market recovery in September, CBRE believes that most markets could resume their recovery later this year if vaccination rates increase materially following the new federal mandate or virus caseloads once again turn down.”
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