• The U.S. Federal Reserve announced a 50-bps cut to the federal funds rate during its September meeting, marking the beginning of its much-anticipated rate-cutting cycle. This rate cuts are encouraging a soft-landing scenario, boosting investor confidence in future office space decisions.

 

• Asking rents continued to grow, reaching $38.15 psf in Q3 2024, compared to $37.68 in Q2 2024. This is a 2.6% growth year-on-year for the office market.

 

• Net absorption recorded a decline of 18.5 million square feet (msf) for the quarter, with year-to-date absorption just shy of -58 msf. The U.S. office real estate market has recorded a total of -293.7 msf in cumulative negative net absorption since the beginning of the COVID-19.

 

• U.S. office vacancy rate stood at 20.9% in Q3 2024 which is national vacancy at its highest point. The vacancy rate grew by 55 bps quarter-on-quarter, making it the 10th straight quarter of increasing vacancy for the office markets.

 

• Occupiers have stopped putting new sublease space on the market. The available sublease inventory has been around 149 msf for three straight quarters, and sublease inventories declined quarter-on-quarter in over half of U.S. markets in Q3 2024.

 

• The U.S. office market under construction pipeline is down to 35.9 msf, its lowest point in last twelve years. The sharp slowdown in the construction pipeline should help insulate the higher quality existing assets in the coming years as new deliveries decline.

 

• The U.S. office sales market continues to face challenges. Financing is hard to come by and the mid-term outlook is uncertain. Despite this, $24.3 billion in transactions took place in the first nine months of the year, with each quarter seeing more activity than the previous quarter.

 

• Average cap rate for the U.S. office sector increased by 12 bps in Q3 2024, from 9.31 percent in Q2 2024 to 9.43 percent in Q3 2024.

 

Source: Cushman&Wakefield/CoStar/RealtyRates