According to the latest monthly office report published by CommercialEdge.com, the share of planned office developments located in suburban submarkets increased to 48% at the close of 2021, up from 35% at the start of 2020. The rise could be a possible hint that a significant portion of new office projects might shift back to the suburbs in the coming years.
Currently, nearly 49% of office space under construction across the top 50 markets surveyed for the report is located in urban submarkets outside of central business districts (CBDs), with 30% of projects being built in suburban areas and 21% located in CBDs. At the close of the year, there was nearly 157 million square feet under construction, 56.3 million square feet of which was new office space started in 2021.
Meanwhile, full-service equivalent listing rates for office space across the top U.S. markets rested at $38.44 per square foot in December 2021 — marking a 1.8% increase year-over-year. In fact, at the individual market level, office space in some markets saw leases increase by more than 10%. For instance, following an increase of 11.2% compared to December 2020, rents for office space for lease in San Diego averaged $42.73 per square foot — one of the largest year-over-year increases recorded among the individual markets surveyed for the latest monthly report.
Conversely, asking rents for Chicago office space followed a more stable trajectory: In December, rates here were up a modest 0.9% year-over-year, resting at $28.19 per square foot.
Likewise, office vacancy has also held relatively stable, averaging 15.5% across the top 50 markets surveyed last month. Overall, this marked an increase of 130 basis points (bps) compared to December 2020. Moreover, despite a few spikes in some markets in 2021, the report notes that vacancy rates mostly plateaued during the second half of the year.
To that end, and with a vacancy rate of 10.3%, Boston was the tightest U.S. office market in terms of leasing volume last month. Similarly, the vacancy rate for office space for lease in Miami was 12.5% in December, which was a decline of 260 bps compared to the previous year — the largest such contraction recorded among the markets analyzed for the report.
Visit the CommercialEdge blog for the full national January office report, including industry and economic recovery fundamentals, as well as notes on the latest office market trends.