According to the WSJ, the US office market saw a significant increase in leasing activity in the first quarter of this year. Approximately 115 million square feet of space was leased, which represents a 13% increase from the previous quarter and the highest level since before the pandemic in mid-2019.
But then, tariffs for everybody! Now tenants are worried that a recession is coming, inflation is going to rise, and that so too will interest rates. Uncertainty is bad for business.
Here's where things broadly sit as of the beginning of this year:
The national office vacancy rate was 19.7% at the end of February 2025
San Francisco had the highest vacancy at 27.8%
$7 billion worth of office sales were recorded in the first two months of the year and the average price was $177 per square foot
The cheapest markets are/were in the midwest with Minneapolis-Saint Paul recording the lowest average sale price of $50 per square foot (versus $215 psf a year ago)
Chicago averaged $67 psf
The most expensive markets were places like San Diego ($662 psf), Manhattan ($450 psf), San Francisco ($282 psf), Miami ($239 psf), and Los Angeles ($207 psf) — we continue to see a flight to quality
Maybe things will get better later this year, or maybe they won't. It's impossible to know what comes next in this trade war.
Cover photo by Delia Little on Unsplash
CBRE recently published this report looking at the impact of the “high-tech software/services industry” on the North American office market.
Here are a few highlights:
- Since 2010, tech has created ~1.1 million jobs in the US at an annual growth rate that is 3x the national average.
- Seattle currently has the fastest tech job growth in North America. This is the first time in 7 years that San Francisco hasn’t been at the top of their list.
- Silicon Valley, Toronto, New York, and Los Angeles all added more than 10,000 tech jobs from 2016 to 2017.
- The biggest “momentum markets”, relying on 2016 and 2017 data, are Montreal, St. Louis, and Seattle.
- Over the past two years (Q2-2016 to Q2-2018), Atlanta, Los Angeles, Orange County, Seattle, and Portland have all seen double-digit rent growth.
One figure that also stood out for me was this one here showing the relationship between US venture capital investment and the average asking rent for office space in San Francisco.
If you’d like to download the full report, click here. You’ll need to sign up for an account with CBRE, but it’s free to do that.