CommercialEdge: Office Market Sales Decline and Vacancies Continue to Rise
Originally published on March 6, 2023, by Eliza Theiss for NAIOP E-Newsletter.
Three years after the COVID-19 pandemic upended the office sector, it remains in flux. While many businesses have fully committed to hybrid and remote work arrangements, others are becoming more adamant about getting employees back into the office. And, according to the CommercialEdge U.S. office market analysis, there will be even greater uncertainty and upheaval as the industry transitions to a new status quo.
In 2023, higher interest rates are anticipated to negatively affect both the new supply pipeline and transactional activity; while some buildings will be constructed in desirable sites, many other projects will be postponed or abandoned entirely. Moreover, in addition to fewer office transactions, higher rates will also result in reduced property prices for those that do trade.
At the same time, tenants’ flight to quality is also expected to continue in 2023. Businesses that want workers in the office more frequently are looking for high-quality amenitized space to tempt workers to come in, which can mean embracing smaller footprints in prime locations.