According to CBRE's latest monthly Pulse of U.S. Office Demand Report, top U.S. office markets showed stability in November amid continued uncertainty about COVID, with minimal change in activity levels from the steady recovery of recent months.
"It's rare that a draw can be considered a win, but that is the case with November office-leasing activity in these top 12 markets," said Nicole LaRusso, CBRE Director of Research & Analysis and lead author of the report. "Uncertainty typically hampers leasing activity. But, with two of our indices showing only tiny losses and the third holding steady, it appears that companies remain focused on their long-term needs for office space."
To gauge the pace of recovery, CBRE's monthly report tracks the three leading indicators of office market activity in the top 12 U.S. office markets: tenants-in-the-market (TIM), which quantifies the amount of office space that companies are actively seeking; leasing activity in the form of finalized lease agreements; and the availability of sublease space.
Overall, Boston remains the leader in recovery among the 12 markets, with TIM activity 23 percent higher than pre-crisis levels and leasing activity more than double that benchmark. Dallas-Fort Worth generated strong gains in November to take the runner-up position. Also among the November leaders for overall activity were Los Angeles, Manhattan and Washington, D.C.
A national view of the indices reveals the progress of the office market's recovery. For each index, a reading of 100 equates to the pre-pandemic levels of 2018 and 2019.
The Tenants-in-the-Market (TIM) Index held steady at 85 in November, on par with its peak from June and July. Half of the 12 markets now have TIM-index readings of more than 90, meaning they're either fully recovered to pre-crisis levels or close to it. Boston (123), boosted for the past two years by demand for life-sciences space, remained well ahead of the pack despite a drop in its TIM index in November. November's TIM-index gainers include Dallas-Fort Worth (101 reading in November), Manhattan (99) and Houston (94).
The Leasing Activity Index fell by two points in November to 100. Boston registered a 38-point gain in its index to 209, meaning its leasing-activity levels are now twice what they were pre-pandemic. Three markets - Washington, D.C. (122), Los Angeles (109) and Manhattan (102) crossed the 100-point baseline in November. Overall, six markets notched gains in their leasing activity indices in November, including Los Angeles with a 21-point increase.
The Sublease Availability Index illustrates the market's largest remaining challenge. The index increased by one point to 197 in November, meaning the sublease overhang still is nearly double its pre-crisis level. The sublease index's readings are counter to those of the other two indices; A higher reading in the sublease index indicates the amount of space offered for sublease has grown. A lower reading means less sublease space.
Four markets registered declines in their sublease indices in November: San Francisco (nonetheless at a 466 reading for the month), Manhattan (186), Denver (179) and Boston (148). Of the other eight markets, two registered flat sublease readings in November (Houston and Washington, D.C.) and four showed increase.