Office Market Faces Scarcity as Demand Surpasses Supply
The U.S. office market is experiencing a shortage of premium space due to strong demand outpacing supply, according to JLL's latest report. The sector has seen five consecutive quarters of positive net absorption, with occupiers adding 6 million square feet in Q3 alone. Despite this recovery, new construction remains at historic lows—just 3.5 million square feet delivered in the third quarter—with only 23 million square feet under development nationwide. The decline in supply is accelerating faster than demand can recover, leading to rising rents for both first-generation and second-generation office spaces by over 10% annually. Willy Walker of Walker & Dunlop notes that construction activity remains at about 9% of normal levels due to a lack of equity capital, which could further constrain the market in coming years. Strong demand is being driven by tech hubs like San Francisco and Austin as well as Sun Belt markets. Smaller tertiary cities have nearly recovered pre-pandemic leasing volumes.
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Topics: commercial real estate market recovery net absorption supply and demand