NEW YORK--(BUSINESS WIRE)--Nationally, new demand for office space rose to a 15-month high in August and is now just 13 percent below pre-COVID-19 levels. New demand for office space is up 235 percent year-over-year, reflecting a strong recovery from last summer, according to the VTS Office Demand Index (VODI). The VODI tracks unique tenant tours, both in-person and virtual, of office properties in core U.S. markets, and is the earliest available indicator of upcoming office leases, as well as the only commercial real estate index to explicitly track new tenant demand.
The VODI rose 3.6 percent from July to August - and with the exception of July when the VODI fell 1.2 percent - the national VODI has risen each month in 2021 since the most recent trough in December 2020.
Office-using employment saw a strong rebound in July, with a monthly annualized growth rate of 4.3 percent, up strongly from June when office-using employment recorded the slowest growth in 12 months. Based on the July Bureau of Labor Statistics (BLS) job report, the largest increase in office-using job growth came from an 11.8 percent annualized increase in information services and a six percent annualized increase in professional and business services, while employment in finance, insurance, and real estate fell by 5.2 percent.
“When the pandemic first hit and the world came to a halt, there was a clear correlation between rising COVID-19 cases and falling demand for office space--as cases went up, demand went down,” said VTS CEO, Nick Romito. “Now, even as cases have risen exponentially over the past few months due to the delta variant, we’re not seeing the same correlation. While it may be a bit premature to say that there will not ever be a material impact on new demand and office-using employment as of right now, we’re not seeing it. Companies, even if delayed, are making plans to get their employees back in the office and that bodes well for the office space market.”
Chicago and Seattle rise above their pre-pandemic levels
After 17 months of lower-than-normal demand for office space, both Seattle and Chicago saw new demand for office space rise above their pre-pandemic averages with VODI scores of 110 and 104, respectively. The pre-pandemic average for all cities in the report is 100 and reflects the average rate of demand in 2018 and 2019. While positive for both Seattle and Chicago, it is unknown if the cities can consistently maintain higher than average new demand for office space given their recent volatility.
Los Angeles and New York are also hovering near their pre-pandemic level at 97 and 96, respectively, but unlike Seattle and Chicago, both Los Angeles and New York City have spent the past three months around 100.
Washington, D.C., an outlier among the cities in the report, witnessed its third consecutive month of falling new demand for office space, down 40 percent during the period. The VODI in Washington, D.C. fell to 57 in August from 78 in July. The decline began in May when its VODI of 95 was close to its pre-pandemic average. The last slide of this magnitude in Washington, D.C. was between April and July of 2020.
“The health of individual office markets is hyperlocal. Local vaccination rates, government mandates, and local sentiment are just a few of the drivers of new demand for office space,” said VTS Chief Strategy Officer Ryan Masiello. “That said, the wide-sweeping vaccine announcement made this month by President Biden - impacting up to 100 million U.S. workers employed with the federal government, could start to materially change the need for office space in the coming months across the nation, but especially in Washington, D.C. as institutions prepare for their employees’ return to the workplace.”
VODI Cities |
National |
Boston |
Chicago |
Los
|
New
|
San
|
Seattle |
Washington,
|
Current VODI (August) *A VODI of 100 represents the avg. VODI from 2018-2019 |
87 |
65 |
110 |
97 |
96 |
63 |
104 |
57 |
Month-over-Month Change (%) |
3.6% |
1.6% |
27.9% |
-16.4% |
4.3% |
1.6% |
36.8% |
-26.9% |
Month-over-Month Change (VODI points) |
+3 |
+1 |
+24 |
-19 |
+4 |
+1 |
+28 |
-21 |
Year-over-Year Change (%) |
235% |
59% |
307% |
169% |
317% |
600% |
395% |
58% |
Year-over-Year Change (VODI points) |
+61 |
+24 |
+83 |
+61 |
+73 |
+54 |
+83 |
+21 |
Trophy and Class A office space in New York City gets more popular
Both the share of tours and the total number of tours in Trophy and Class A buildings in New York City increased in August from July. The share of tours in Trophy and Class A properties increased to 78.2 percent in August from 72.9 percent in July and the total number of tours of Trophy and Class A properties increased 19.4 percent from July to August, while tours of Class B and C properties fell by 10.5 percent during the same period. The average tour requirement size remained flat from July to August at 7,000 square feet.
About VTS
VTS is commercial real estate’s leading leasing, marketing, asset management, and tenant experience platform where the industry comes to make deals happen and real-time data comes to life. The VTS Platform captures the largest first-party data source in the industry, which delivers real-time insights that fuel faster, more informed decision making and connections throughout the deal and asset lifecycle. VTS Data, the industry’s only forward-looking market dataset, and VTS Market and Marketplace, the industry’s first integrated online marketing solution, give landlords, brokers, and tenants unparalleled visibility into real-time market information and the direct connectivity to execute deals with greater speed and intelligence at every point in the planning, marketing, leasing, and asset management cycle. VTS Rise is the industry’s most comprehensive tenant experience solution, offering occupiers, building operators, and visitors an immersive, tech-enabled experience.
More than 60 percent of Class A office space in the US and 12 billion square feet of office, retail, and industrial real estate globally is managed on the VTS platform. VTS’ user base includes over 45,000 CRE professionals including respected industry leaders like Blackstone, Brookfield Properties, LaSalle Investment Management, Hines, Boston Properties, Oxford Properties, JLL, and CBRE. To learn more about VTS, and to see our open roles, visit www.vts.com.
