According to new data from CBRE, companies stopped standing still in 2021 when it comes to long-term real estate decisions.
Office-using companies in major U.S. markets shifted to more relocations and expansions in the first three quarters of 2021, reflecting increased confidence in making long-term real estate decisions compared to a year earlier. In turn, companies focused less in 2021 on status-quo lease renewals and space contractions.
CBRE's analysis of office-leasing activity found that expansions in primary markets - Manhattan, Boston, Chicago, Washington, D.C., Los Angeles and San Francisco - climbed to 24 percent by square footage last year from 17 percent in the final three quarters of 2020, after the pandemic struck. Likewise, relocations within the market - as opposed to lease renewals in the same space - increased to 33 percent from 23 percent. Conversely, space contractions declined to 5 percent from 10 percent.
"Many companies are now leasing more and better space to entice employees and new hires into the office. And many are expanding into new markets," said Julie Whelan, CBRE's Global Head of Occupier Research. "While the ongoing impact of COVID-19 variants on activity remains hard to predict, office market resilience amid the Delta variant in 2021 provides reason for optimism."
The data for secondary markets tells a similar story. CBRE identifies as secondary markets 13 cities including Atlanta, Dallas-Fort Worth, Philadelphia and Seattle. Similar to the primary markets, these markets saw fewer in-place renewals and more space expansions in 2021 than in 2020. A notable difference: Secondary markets saw a larger increase in new-to-market activity than did primary markets, up to 17 percent in 2021 from 10 percent in the final three quarters of 2020. Markets in the South-Central (Texas and surrounding states) and Southeast regions accounted for most of this activity.
"The uptick in new tenant activity in secondary markets indicates more companies are seeking to expand into less expensive markets with high quality labor pools," said Whelan.
CBRE's analysis examined 140 million sq. ft. of U.S. office-lease transactions from the second quarter of 2020 to the third quarter of 2021. Comparisons regard the final three quarters of 2020 against the first three of 2021.