US Office Real Estate Market Size
| Study Period | 2019 - 2029 |
| Base Year For Estimation | 2023 |
| Forecast Data Period | 2024 - 2029 |
| Historical Data Period | 2019 - 2022 |
| CAGR | > 4.00 % |
| Market Concentration | Low |
Major Players
*Disclaimer: Major Players sorted in no particular order |
US Office Real Estate Market Analysis
- The US office real estate market is poised to register a CAGR of greater than 4% during the forecast period.
- The COVID-19 pandemic hurt the US office sector a lot, and it may take a while for it to get better.The third quarter of 2021 was promising for the US office market. The vacancy rate was stabilizing, sublease space was decreasing, and net absorption was positive for the first time in Q3 2021 since Q1 2020.
- The property markets also felt the impact of the pandemic. Enterprises and frontline workers had to overcome many obstacles to stay in business. Almost every company in the property industry was compelled to make drastic changes, especially in the retail sector. To accommodate rising consumer demand and overcome acute shortages, retailers swiftly built up their home delivery and curbside pickup services while restructuring their supply chains. Many people who work from home have had to adjust their living environments on the fly. The emerging trend of the year is "flexibility."
- Vacancy rates rose throughout the American office real estate market during the coronavirus outbreak. The quarterly vacancy rate before 2020 was approximately 12 percent, but as the epidemic spread, it increased to more than 15 percent. Around 15.4 percent of office space nationwide was unoccupied in the third quarter of 2022. Businesses are wary of expanding or renewing leases because a sizable portion of the workforce now works from home or uses a hybrid working paradigm.
- In the third quarter of 2022, the fundamentals of the US office market remained negative. The third quarter of 2022 saw minus 4.4 million square feet (msf) of net absorption, bringing the year's total to negative 16.2 msf. With a quarterly net absorption of -2.2 msf and -2.0 msf, respectively, both major gateway and secondary markets lost the same number of tenants. Just 3.8% of the nation's total inventory is held in tertiary markets, which saw negative net absorption of 0.1 msf. Increasing vacancy is a sign of low demand, which is shown by consistently low net absorption, and high supply, which is shown by a lot of new construction in the works.
US Office Real Estate Market Trends
Increase in Leasing Volumes
Gross lease volumes increased by 7.8% in Q3 2021, topping 40 million sq. ft. for the first time since the outbreak. As a result, total transactions were up 1.7% from the same period last year. However, they are still 43.8% lower than in 2019. Due to flexible business rules and individual and corporate shifts toward affordability, lower-cost secondary markets in the Sun Belt and the West dominated this quarter, with 18.7% growth in leasing compared to 7.5% growth in gateway geographies.
The unemployment rate dropped to 5.2%, a new post-pandemic low. However, labor participation remains low as workers continue to be concerned about the COVID pandemic. The relationship between job growth and office space requirements may become less connected with emerging hybrid and remote work models.
A recent report from the business world says that the amount of office space rented in Manhattan has gone up by 26%. Office demand in Manhattan was 13.5% higher than the five-year rolling average (8.13 million square feet) and 11.5 percent higher than the 10-year average at 9.23 million square feet, the biggest quarterly volume since year-end 2019. (8.27 million square feet). In contrast, leasing activity increased by 27.6% during the third quarter of 2022 compared to the 7.23 million square feet of activity during the same period in 2021. A total of 24.17 million square feet have been leased so far this year, which is about 50% more than the 16.34 million square feet that have been leased so far in 2021. If the current rate of leasing is maintained for the remainder of the year, 2022's full-year leasing volume would beat 2021's full-year total (24.96 million square feet) by 29.1%.
Office Investment and Rental Rates
For real estate investors, offices are one of the most important asset groups. The US office real estate investment market was valued at USD 24.4 billion in the second quarter of 2021. Rents have steadily grown in recent years, and they are expected to continue to grow in the future. According to the office rental index, as of September 2021, gross rents had grown by almost 24% since the index was established at 100 in 2008. Manhattan, NY, and San Francisco, CA, were the costliest office markets, with yearly sq. ft. rents of USD 128 and USD 95, respectively.
When the need for office space goes up again, newly finished buildings may get even more tenants.People who work in an office will want to know about the latest health and wellness systems and certifications.Since the pandemic, developers have been less eager to start new projects. Amid the crisis, demand was stifled. Basic construction expenses have risen dramatically due to the pandemic. While renters continue to seek out well-equipped Class A office space in prime locations, metro areas with high-quality office products may be better able to weather the storm. Older assets, particularly those that are poorly situated and maintained, are anticipated to be subject to downward pressure from this trend, increasing their risk of distress. The average full-service equivalent listing rate in the top 50 U.S. office markets was $38.04 in January, up 1.1% from the previous year. At the same time, the U.S. office vacancy rate increased further, rising to 16.6% from January 2022, an increase of 80 basis points.
As the pandemic upended the office sector, office vacancy rates have risen in most markets, although certain locations have seen rates rise more quickly than others. The culture of working from home and the recent layoffs in the tech industry have had a big effect on cities that grew quickly because of the tech industry.
US Office Real Estate Industry Overview
The US office real estate market is relatively fragmented. The report covers the major companies in the US office real estate market. Large firms have financial resources to their advantage, whereas small businesses can compete effectively by building in local markets. Some of the office real estate developers in the United States are Turner Construction Company Inc., Kiewit Corporation, Hensel Phelps Construction, Gilbane Building Co., and Skanska USA Inc.
US Office Real Estate Market Leaders
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Turner Construction Company Inc.
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Hensel Phelps Construction
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Gilbane Building Co.
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Balfour Beatty LLC
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Simon Property Group
*Disclaimer: Major Players sorted in no particular order
US Office Real Estate Market News
April 2023: The principals of Mishawaka-based Cressy Commercial Real Estate are pleased to announce the completion of a merger with Mno-Bmadsen, the nongaming investment arm of the Pokagon Band of Potawatomi. The merger will enable Cressy to expand into new markets and implement their strategic goals while continuing to provide world-class service to past and future clients. Mno-Bmadsen will benefit from additional resources to manage the real estate needs of its growing portfolio of investments.
February 2023: Mirabaud Asset Management has structured the acquisition of a two-building office occupied by a non-profit academic foundation and medical center. The transaction was structured by Mirabaud Asset Management as a Luxembourg-based institutional commercial real estate partnership on behalf of its international clientele. This acquisition brings the value of Mirabaud's US real estate portfolio to almost $600 million.
US Office Real Estate Market Report - Table of Contents
1. INTRODUCTION
1.1 Study Assumptions
1.2 Scope of the Study
2. RESEARCH METHODOLOGY
2.1 Analysis Methodology
2.2 Research Phases
3. EXECUTIVE SUMMARY
4. MARKET INSIGHTS
4.1 Current Economic and Real Estate Market Scenario
4.2 Government Regulations and Initiatives in the Industry
4.3 Technological Innovations in Office Real Estate Market
4.4 Impact of Remote Working on Space Demand
4.5 Insights into Office Real Estate Construction Costs
4.6 Insights into Key Office Real Estate Industry Metrics (Supply, Rentals, Prices, Occupancy (%)/Vacancy (%))
4.7 Insights into Rents, Leasing, and Rental Yields in the Office Real Estate Segment
4.8 Insights into Key Trends on Rental and Leasing
4.9 Impact of COVID-19 on the Market
5. MARKET DYNAMICS
5.1 Market Drivers
5.2 Market Restraints
5.3 Market Opportunities
5.4 Porter's Five Forces Analysis
5.4.1 Bargaining Power of Suppliers
5.4.2 Bargaining Power of Consumers/Buyers
5.4.3 Threat of New Entrants
5.4.4 Threat of Substitute Products
5.4.5 Intensity of Competitive Rivalry
5.5 Industry Value Chain Analysis
6. MARKET SEGMENTATION
6.1 By Region
6.1.1 Northeast
6.1.2 Midwest
6.1.3 South
6.1.4 West
6.2 By Sector
6.2.1 Information Technology (IT and ITES)
6.2.2 Manufacturing
6.2.3 BFSI (Banking, Financial Services, and Insurance)
6.2.4 Consulting
6.2.5 Other Services
7. COMPETITIVE LANDSCAPE
7.1 Company Profiles
7.1.1 Turner Construction Company Inc.
7.1.2 Kiewit Corporation
7.1.3 Hensel Phelps Construction
7.1.4 Gilbane Building Co.
7.1.5 Skanska USA Inc.
7.1.6 PCL Construction Enterprises
7.1.7 Dpr Construction
7.1.8 Hitt Contracting
7.1.9 B.L. Harbert International
7.1.10 Trammell Crow Company
7.1.11 Clayco Inc.
7.1.12 Ryan Companies US Inc.
7.1.13 Structure Tone LLC*
- *List Not Exhaustive
8. FUTURE TRENDS
9. APPENDIX
10. DISCLAIMER
US Office Real Estate Industry Segmentation
Office real estate is the business of building buildings that companies from different industries can rent or buy.The goal of this report is to give a thorough look at the US office real estate market.It looks at the market insights, dynamics, technological trends, and government projects in the office real estate sector.
The US office real estate market is segmented by region (Northeast, Midwest, South, and West) and by sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services). The report offers market size and forecasts in dollars (USD) for all the above segments.
| By Region | |
| Northeast | |
| Midwest | |
| South | |
| West |
| By Sector | |
| Information Technology (IT and ITES) | |
| Manufacturing | |
| BFSI (Banking, Financial Services, and Insurance) | |
| Consulting | |
| Other Services |
US Office Real Estate Market Research FAQs
What is the current United States Office Real Estate Market size?
The United States Office Real Estate Market is projected to register a CAGR of greater than 4% during the forecast period (2024-2029)
Who are the key players in United States Office Real Estate Market?
Turner Construction Company Inc., Hensel Phelps Construction, Gilbane Building Co., Balfour Beatty LLC and Simon Property Group are the major companies operating in the United States Office Real Estate Market.
What years does this United States Office Real Estate Market cover?
The report covers the United States Office Real Estate Market historical market size for years: 2019, 2020, 2021, 2022 and 2023. The report also forecasts the United States Office Real Estate Market size for years: 2024, 2025, 2026, 2027, 2028 and 2029.
US Office Real Estate Industry Report
Statistics for the 2023 US Office Real Estate market share, size and revenue growth rate, created by Mordor Intelligenceā¢ Industry Reports. US Office Real Estate analysis includes a market forecast outlook to 2029 and historical overview. Get a sample of this industry analysis as a free report PDF download.
US Office Real Estate Market Report Snapshots
