Market Trends of North America Office Real Estate Industry
This section covers the major market trends shaping the North America Office Real Estate Market according to our research experts:
Increasing Rental Prices of Office Spaces
The office market in North America received a hard hit by the pandemic. Now, the market is recovering as significant growth was observed in the office absorption rate in North America. Furthermore, rental prices for office spaces are also witnessing positive growth after the pandemic crisis.
In addition, rental growths are high in Class A office spaces. In the fourth quarter of 2021, the rent for US Class A office spaces was nearly USD 41.63 per square foot, which is 1.15 times higher than other class office spaces. Meanwhile, in Canada, Class A office space rent was CAD 23.62 per square foot in the third quarter of 2021.
The overall office space sector is witnessing a positive growth rate in the United States. The Northeast region is leading in rental growth in the country, with more than USD 44.16 per square foot in Q4 2021, a growth rate of 2% from the same quarter in 2020, followed by the West, South, and Midwest regions. Meanwhile, in Canada, Vancouver and Waterloo experienced rental growth of 12% and 11.1%, respectively.
Office Leasing Volume is Witnessing Significant Growth
Even though the office market was negatively impacted during the pandemic, it is recovering with significant growth in net office space absorptions, low vacancy rates, etc. Most of the office activities have been returning to pre-pandemic levels, which is supporting the increasing new leasing activity.
In the United States, occupiers are concentrating on long-term office space leases in the market. In addition, in Q4 2021, total office space leasing was 29% higher than the same quarter of 2020. Also, net absorption in Q4 2021 was 33% higher than the previous quarter and 75% above Q4 2020. Meanwhile, in Canada, the pre-leasing activity of under-construction projects experienced growth. In addition, more than 61% of downtown under-construction projects were pre-leased by the occupiers in Q4 2021, as well as 25% of suburban under-construction projects were pre-leased in Canada.
Furthermore, different sectors are driving the demand for leasing activity, which includes technology services, financial services, healthcare or life sciences, manufacturing, government, etc. Technology continues to be the top sector for leasing activity in the North American region, with more than 17% share in leasing activity, followed by financial services and healthcare.
