Ongoing Appetite for Close-In Space Keeps Construction Humming
The end of the first quarter 2021 marked the one-year point since the onset of COVID-19 and there are more impacts on the regional office market. With the pandemic continuing to take its toll on the local and national economy, the quarter’s office data shows a sharp spike in regional vacancy, going from 7.7 percent last quarter to 9.02 percent as of late, according to Kidder Mathews’ quarterly report.
Looking further back, the change in vacancy of 5.95 percent from when the pandemic first hit indicates a 307 basis point increase in vacancy. The regional office market is also experiencing a continued downward trend after posting 2.56 million square feet in negative absorption for the first quarter 2021, on the heels of posting last year’s lowest annual regional net office absorption in 10 years at just 50,900 square feet.
Investment sale activity continues to be sluggish with only three sales of more than $50 million during the quarter. On the bright side, the 19 major regional office construction projects are all pushing forward with 76 percent of that space pre-committed. This is thanks to the ongoing appetite for close-in office space by tech titans, with Amazon continuing to lead the charge along with Microsoft, Google, Facebook and Apple.