Based on commercial real estate investment reports from the first half of the year, the office sector is showing early signs of recovery, with demand holding steady and the active deal pipeline growing. JLL reports that its office leasing volume held essentially flat in Q2 (-2.2%), but that active space requirements grew by 5.8% quarter-over-quarter and currently reflect the highest levels of demand since Q4 2021.
In its Q1 report, JLL reported a 13% increase in leasing activity, which CEO Christian Ulbrich attributed to return-to-office mandates and continued rent growth as commercial tenants compete for Class A and A+ office buildings. This “flight to quality” means that premium office spaces are in top demand, but that spillover demand extends to upgraded Class B buildings.
Standout office markets registering positive net absorption: Atlanta, Austin, Dallas, Houston, Nashville, New York City and Tampa. In Q2, inventory was balanced by the conversion and redevelopment of office properties—totaling more than 8 million square feet—into residential or other uses, JLL reports.
CBRE also shows stability in the office sector, with positive net absorption, healthy leasing activity and relatively low levels of new supply with net absorption of 2.3 million square feet, marking the fourth consecutive quarter of positive demand. The company’s leasing activity increased by 18% year-over-year in Q1 to 54 million square feet, remaining above the five-year quarterly average.
Avison Young reports $7.8 billion in sales of office properties in Q1, up 9.7% from the year-ago period. Cushman & Wakefield also reports that office and industrial leasing fueled its first-quarter revenue gains.