What the Future Holds for the US Office Market: Statistics and Challenges

What the Future Holds for the US Office Market: Statistics and Challenges

Numerous experts in 2021 made encouraging forecasts regarding the growth of the office real estate market. Many believed that by the third or fourth quarter of the year, things would begin to improve and companies would be more willing to return to work in the office. However, the latest strains of coronavirus infection have forced many to rethink their predictions. Given all the indicators, bets were made for this year.

Post-COVID changes are already being observed, which means that there are hopes for this market. Despite the advanced technologies used to support communication in companies, the effectiveness of teamwork still leaves much to be desired. That is why numerous companies need an office to rent. However, office spaces need to be upgraded to meet the new needs of company employees.

Below we will talk about what the future holds for the US Office Market this year, as well as talk about statistics, possible problems, and development prospects.

Unexpected fall in the unemployment rate

The prosperity of this market depends on many factors. One of the most significant factors is the fall and rise in unemployment. Now there is an unexpected drop in the unemployment rate in the country. In February, this level was 3.8%. Already in March, it fell by 0.2%. The number of unemployed people decreased by more than 315 thousand people. Now the number of unemployed in the country is just over 5.95 million people.

In recent months, the number of employed people has increased significantly. In general, the employment rate increased by more than 735 thousand people. This factor indicates that this will positively affect the recovery of this market.

Improving tenant experiences

Now every landlord understands that it will not be the same as before. Traditional office space will no longer be in demand. That is why landlords are going to invest in the modernization of office space for rent. Particular attention will be paid to the following:

  • Sustainable development;
  • Modernization of buildings and office premises;
  • Equipping the premises with high technologies;
  • Implementation of an improved air filtration system;
  • Creation of modern design.

Even though more than 85% of companies are planning to introduce a hybrid model, increased conditions remain a priority.

Location selection

The coronavirus infection has not yet disappeared and is unlikely to happen in the coming months. Numerous companies from various industries are looking for offices for their companies, both in city centers and in suburban areas. The demand for office rental in urban centers is still high. This is because cities have faster access to talent scouting, innovation, better transportation, and city energy.

Another reason why urban centers remain attractive to tenants is that landlords are offering improved office space. In such rooms, there is an abundance of air, as well as a sufficient amount of light. Here, great emphasis is placed on the well-being of company employees. Those active in urban leases are dominated by technology, healthcare, and financial institutions.

Resumption of construction of new office premises

With the onset of the global pandemic, many sectors have suspended their activities due to the disruption of supply chains. One of the sectors most affected is the construction sector. The number of new square meters put into operation over the years was 40% less compared to 2019.

Things are starting to improve in this area now. More than fifty million square feet of new office space is planned to be completed this year. Buildings and premises will be completed, companies will return to the office – this indicates that favorable conditions will be created for those who are going to rent out premises. In this way, landlords will be able to negotiate lease terms more freely, as well as provide more benefits.

Demand for Class A and B office space

Demand for Class A and B buildings is quite uneven. Class A buildings are the most desirable among numerous companies. Such buildings are designed to impress. They have an impeccable design, high-quality finishes, and advanced technology for renters. They are located in convenient and prestigious areas where transport links are well developed. These are not always new buildings. These may be buildings that are well refurbished, or they may be older, more prominent buildings.

Since the beginning of the coronavirus infection, the prices for renting such office space have increased significantly. Surcharges increased by 30%. It would seem that demand should be falling since many companies suffered significant financial losses, but such allowances did not affect the desire of companies to rent such spaces.

At the same time, Class B buildings were less in demand. Often, some tenants renting such premises cannot pay the rent. Thus, it becomes clear that despite the rise in prices, companies do not want to settle for less. They want to make their employees as comfortable as possible. Class B building owners will soon have to come to terms with investing in building upgrades to meet company requirements.

Conclusion

In general, there are positive changes in the development of this market. Companies are ready to return to the office, but they must meet new needs. Landlords will finally have more freedom of action, thanks to the commissioning of more office space.

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