High-tech firms are leading the return to office trend as commercial leasing rates are slowly rising, but that doesn’t mean office space is being filled the same way as before the pandemic; actual occupancy rates remain low.
Although the impact of the global pandemic is still being felt in the commercial office space market, many parts of the world are now moving towards living with the COVID-19 rather than operating with strict restrictions, office leasing data shows. With 5.4 million square feet of net occupancy growth across the US, office leasing rates in the fourth quarter of 2021 were positive for the first time since the onset of the pandemic. Leading the uptick: leasing rates in secondary-growth markets (cities with populations between 1 and 5 million people). Tech remained the dominant leasing driver through the end of 2021, representing 21% of Q4 activity, according to Jones Lang LaSalle IP (JLL), a commercial real estate and investment management services firm. High-tech firms continued to dominate the office leasing space, adding about 3.3 million square feet of leased office space in the quarter. « Big tech, in general, has expanded by 10.1 million square feet over the course of the pandemic, » said Phil Ryan, US research director at JLL. Office leasing rates, however, are still below pre-pandemic levels, though tenant demand is expected to rise incrementally throughout 2022 due to favorable conditions, the JLL report said. For the first time in two years, more office space was leased than vacated in Q4 2021. Overall, leasing activity rose by 9.2% in the last three months of 2021, bringing quarterly volumes to 71.3% of pre-pandemic norms. Leasing and occupancy, however, are two different things. Leasing refers to space expected to be occupied, not actual employees seated behind desks. This month, the average occupancy rate on Kastle System’s Back to Work Barometer rose to 40.5%, up from 39% in November 2021. That’s the highest rate since March 2020, and every city on the Back to Work Barometer saw occupancy gains. (The barometer measures occupancy rates in 10 metropolitan areas, including New York City, Chicago, Houston, and Washington D.C.) Kastle Systems Back to Work Barometer. Kastle Systems is a managed security provider to more than 10,000 companies globally; it uses employee badge-swipe data to determine workplace occupancy. According to workplace technology firm Freespace, however, US office occupancy rates have been on a roller-coaster ride over the past four months, moving between 11% occupancy in November,2021, to 3% in January, and finally raising back up to 6% this month.
