Tenants have shown more confidence in signing long-term leases, according to CBRE. The average size of leases for at least 10,000 sq ft has also grown sequentially for the second consecutive quarter to 29,875 sq ft. Availability of sublease space has shrunk to 4.1% of total inventory, compared with a peak of 4.7% in 2Q2023. Vacancy rate for prime office space improved 20 basis points q-o-q to 15.5%.
“Long-suffering” US office S-REITs have exhibited nascent signs of recovery, says UOB Kay Hian (UOBKH) Research analyst Jonathan Koh. Leasing volume has picked up and tenants are more willing to commit to larger and long-term leases. Physical occupancy is trending higher as more companies demand employees return to working at the office, he adds.
According to CBRE, leasing volume increased 11.5% y-o-y to 51.5 million sq ft in 3Q2024, reaching 86% of pre-pandemic levels. Tenants from the finance and legal sectors remain active, while tech companies have started to return to the office market. Net absorption increased 87% q-o-q to 4.3 million sq ft, marking the second consecutive quarter of positive net absorption.
