How Much Space Will the Office Market Shed?

Real Estate

As previously reported, the office market has been rocked by the pandemic, thanks to both widespread job loss and remote work mandates. A recent report from Cushman & Wakefield captured the pandemic’s impact on the office market as well as looks at a potential path to recovery.

According to the Cushman and Wakefield report, the pandemic didn’t initiate this trend. Office users have been shedding office space and moving to denser workplace models for years—and there office absorption rates were experiencing structural decline. The pandemic could reverse that downsizing trend now that employees need more space for social distancing. However, in place of densification, remote work policies will likely continue the trend of reduced needs for office space. As a result, the report postures that absorption rates will actually trend lower than they had under the densification trend.

In another article on the subject, despite buzz about mass migrations from cities, we hear that suburban office continues to play second fiddle to central business districts. Activity in the national office market remains robust in Downtown areas, and such locations still are preferred by many corporations, according to new research from Newmark Knight Frank. In fact, suburban office markets are lagging behind downtown areas in popularity. During the second quarter, the national office market’s negative absorption in suburban and exurban submarkets came in at 60.2% while Central Business Districts only suffered a 39.8% loss of occupancy.

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