The United States is home to one of the world’s largest commercial real estate markets, with an estimated revenue worth of approximately $1.2tr. In terms of size, industrial space is the largest sub-market with 21.7bn square feet, followed by retail with 14bn, and offices, which account for 11.8bn.

In Q1 2023, the average price per square foot for US offices was just over $38. Retail averaged out to $18.09 / square foot, and industrial space came in at just under $8 / square foot. However, there are significant variations in average prices based on location and real estate class. Here is a summary of average commercial rates in key USA cities:

•   New York: Average gross rates for metro New York offices are $77 / sq ft / year. Industrial space averages $19 / sq ft / year.
•   Los Angeles: $44 / sq ft / year for offices in the metropolitan area and $11 / sq ft / year for industrial premises.
•   Miami: In the same range as Los Angeles, at $46 / sq ft / year for offices and slightly lower for industrial space ($8 / sq ft / year).
•   Boston: $38/ sq ft / year for metro offices, rising to $80 in Cambridge. Industrial properties average $10 / sq ft / year.
•   Philadelphia: $32 / sq ft / year for city center offices, $27 for suburban space, and $6 / sq ft / year for industrial properties.
•   Atlanta: Slightly under $30 / sq ft / year for offices with a rate of $35 in Downtown Atlanta. Industrial space is charged at an average of $5 / sq ft / year.
•   Chicago: Approximately $33 / sq ft / year for office space, rising to averages above $40 in The Loop. Industrial premises average $6 / sq ft / year.
•   Dallas and other urban centers in Texas: between $25 and $30 / sq ft / year, whereas industrial rates are below $5.

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Recent years have seen some major U.S. educational institutions enter into partnerships with providers of flexible office space, creating coworking solutions that have already proven to be highly beneficial to both parties. These coworking spaces have served to support students by providing a professional environment where they are encouraged to interact with other college students and engage in networking opportunities. The coworking communities that have been formed on college campuses across the U.S. have also helped to support businesses surrounding these emergent hubs, providing them with direct links to students looking to enter the professional world.

Prior to 2020, the highly innovative coworking sector served to revitalize the somewhat stagnant office space market; experiencing healthy annual growth and gradually becoming accepted as a legitimate alternative to traditional offices. The shakeup caused by the COVID-19 pandemic, however, decimated the coworking space market, limiting growth and forcing coworking space providers to consider short-term alternatives.

Many of the partnerships made between coworking space providers and higher education institutions have already proven to be tremendously fruitful. The nature of these partnerships are also wide-reaching, with some campuses opening their facilities to serve as coworking spaces and others working directly with shared spaces to create ‘micro-campuses’ for remote students across the globe. Additionally, the partnered development of new coworking facilities within leading tech hubs has spurred greater innovation and investment than would have been previously possible for the hosting university to achieve alone. Ultimately, these higher education institutions have joined with global coworking leaders to uphold campus-like spirits of innovation, human interaction, and collaboration, whilst also introducing students to the professional atmosphere of a shared office space.

To say that this is a match made in heaven is an understatement. Read on to get some insight into how this innovative marriage was started, and how those leading the way are driving innovation, reshaping what constitutes an educational workspace, and influencing the connection between talented students and local businesses.

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Among the many changes brought about by COVID-19, the disruption to work arrangements and mobility patterns is perhaps the most profound. 

Since 2020, companies of all shapes and sizes have decided to re-structure their workforce, implementing new working models and providing employees with previously unforeseen levels of mobility. This freedom has resulted in many of these employees re-structuring their lives, relocating to more affordable or personally preferable cities. Moreover, the increased implementation of remote and hybrid office-work models has changed the way employers and employees think about location, causing many workers to reassess the need to live close to major business centers.

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The life sciences and healthcare sectors are two of the small handful of sectors that have come out stronger on the other side of the COVID-19 pandemic. This article offers an overview of relevant U.S. market data, as well as the way in which specialist office providers are serving the demands of businesses looking to house themselves in mixed-use office spaces that include both traditional desks and lab space.

Mixed-Use Office Space in the Life Sciences Sector

While offices occupied by countless other industries emptied virtually overnight in response to the pandemic, life sciences companies stayed put — with some even opting to move to larger premises to accommodate additional employees. In 2021, the sector was still attracting millions of dollars in investments — particularly in the fields of Biotech and Medtech — due to their status as safe, recession-proof assets. In fact, 2021 saw a record $78 billion of capital investments to life sciences-related companies in the United States, up from the $70 billion seen in 2020.

Rapid expansion also put pressure on these companies to source top talent. In the United States, life sciences is a leader for employment growth. Illustrating this — in Q1 2021 the life science sector had surpassed the tech sector in job creation numbers.  Read the rest of this entry »

Office Space

As of Q2 2022, we’re continuing to see signs of Atlanta’s increased post-pandemic recovery when compared to its peers. Office occupancy rates have shot up dramatically since Q2 2021, though leasing overall has still not reached pre-pandemic levels. Major players — including Google, Microsoft, Visa, and Airbnb — have been in the process of opening up thousands of high salary jobs in offices throughout Atlanta, heavily contributing to the increased positive sentiment that has permeated throughout the office sector in 2022.

Rents have settled after the turbulent events of the early 2020s. Vacancy rates in the metro are still sitting around 18%, making it harder for providers to hike rates. Overall vacancy rates have dropped from 18.8% in Q1 2022 to 18.4% in Q2, providing more evidence of recovery. Despite this, vacant square footage by volume has increased in the metro area, with just over 43 million sq/ft vacant in the middle of 2022 representing a rise compared to the same time in 2021, which saw 42 million sq/ft of vacant office space.

Vacancy rates in Midtown are down to 19% in Q2 2022, compared to 22% in Q2 2021. South Atlanta still shows the lowest vacancy rates across the metro area at 11.7%, though this is up from the Q2 2021 figure of 10%. Despite this increase, recovery is still trending positively when compared to other areas in Atlanta — though reaching the healthy metrics of 2019 is still a ways off. Read the rest of this entry »

The US office market struggle to get back on its feet for most of 2021, despite the year starting with the expectation that this arm of the commercial real estate market would be on its way to recovery by Q3 to Q4. Ultimately, the emergence of the Delta and Omicron variants of COVID-19 resulted in forecasts being revised, and the recovery horizon was pushed to 2022.

We’ve collected a brief overview of the trends, figures, and projections for the 2022 US office space market below, check back frequently in the year ahead for more insight into industry trends and recovery projections.

Economic Indicators Tipped to Improve

There are many factors influencing office market performance, but macro-economic indicators are some of the most critical. As we settle into 2022, a decline in unemployment is expected to be one of the most important factors underscoring the recovery of the office market. Recent data from the U.S. Bureau of Labor Statistics outlined a small uptick in unemployment in January 2022, moving from 3.9% at the end of 2021 to 4.0% to end the first month of the new year. Read the rest of this entry »

Notable Office Market Insights

•  Ongoing recovery is the main theme, continuing the trend seen in most office markets throughout 2021.
•  Positive absorption indicators.
•  Slight increase in rental rates.
•  Marked differences in occupancy levels, vacancy rates and general performance from city to city.
•  Remote working practices are still commonplace in key markets, such as San Francisco.
•  142 million square feet of office space currently under construction.

Lease Rates & Asking Rents

Recent data from Commercial Edge outlines a nationwide rental listing rate average of $38sq/ft in January 2022. These figures may be seen as somewhat inflated due to the number of high quality spaces currently listed due to being vacant, with Class A workspaces being listed at much higher prices.

According to Avison Young, Q4 average rental prices per square foot in gateway markets were as follows:

•  Manhattan: $84 sq/ft
•  San Francisco: $80 sq/ft
•  Washington DC: $54 sq/ft
•  Atlanta: $29 sq/ft
•  Boston: $38 sq/ft
•  Chicago CBD: $39 sq/ft

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The US office market has been dramatically transformed by the changes to work practices and mobility restrictions implemented throughout the course of 2020 and early 2021. Whilst it was predicted that the market would slowly rebound starting in recent months, the demands of office occupiers will have changed substantially since the start of the COVID-19 pandemic. Below is a brief overview of the main things to look for in an office space during the second half of 2021.

Office Layout

Flexible spaces

Flexibility remains a key consideration when choosing an office, not only in terms of lease terms, but also office layouts. Many office-based companies are still unsure about their ability to retain staff in the face of reduced revenue, combating this uncertainty by implementing rotating shifts or flexible work hours, two factors which have ultimately led to businesses struggling to identify the total headcount in the office at any given time.

This uncertainty will lead to an increase in demand for modular spaces that can be adjusted depending on the number of people present in the workplace. These kinds of dynamic layouts have been an option for several years, often going hand in hand with trends towards multi-functional office spaces. Some of the main elements that typify flexible workspaces include:

•  Blurred indoor to outdoor transitions.
•  Movable walls and room dividers.
•  Lightweight or mobile office furniture.
•  Adjustable or movable lighting.

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In a previous blog post we examined the performance of the commercial real estate market in some major US cities. This is the second article in this series, which uses data from late 2020 and early 2021 to examine vacancy and supply rates in cities such as Los Angeles, Chicago, Atlanta and Houston. These statistics illustrate the impact of COVID-19 on the commercial property rental market, as well as the types of properties that are holding strong in the face of negative trends.

Los Angeles

Los Angeles is a hub for creative, media, and entertainment companies, many of which are office-based. The city’s proximity to major cargo ports makes it convenient for logistics and distribution businesses, both of which have kept the industrial real estate market strong.

Offices

•  Vacancy rates in downtown Los Angeles are 21.5%.
•  In Q4 20202, there was more than 5.5 million square feet for vacant space, with 3.4 million feet being in the Financial District.
•  The majority of vacant inventory involves Class A offices.
•  Supply increased by more than 2 million square feet in the past 12 months.
•  No new supply is expected to enter the market as no projects are currently under construction in the CBD area.
•  Vacancy rates average 22.5% outside of the CBD, however, they reach 56% in the Fashion District.
•  Vacancy rates are just under 18% in the Greater Los Angeles area.

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With a market size of nearly $900bn, the United States has one of the world’s largest commercial real estate markets, coupled with some of the most desirable business locations to match. This post serves as the first part of our examination into the US market’s performance based on data from Q4 2020 and Q1 2021.

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