Pandemic Will Have “More Subdued” Impact on Office in 2022, Says Cox Castle’s Ouvrier

“The hope that the disruptions to our daily lives caused by COVID-19 would be behind us by the end of 2021 has faded,” writes Andrew M. Ouvrier at Cox, Castle & Nicholson. Although the general economy has rebounded from the short-lived recession that the pandemic and related shutdowns caused in 2020, the office market hasn’t returned to pre-COVID levels yet. 

A partner with Cox Castle, Ouvrier writes in an article titled “Office Leasing in 2021: Anticipation of the Return to Office” that most existing tenants have continued making their rental payments. He notes that this is due in part to the long-term nature of most office leases, and in part due to “a desire for tenants to have an office for their employees to return to once the ‘return-to-office’ occurs.” 

However, low occupancy rates and a large inventory of available sublease spaces have generally pushed rental rates down and created tenant-favorable market conditions. As one example, Marcus & Millichap reported that office rents in San Francisco fell 9% in the fourth quarter of 2021. 

“In general, COVID-19 will still have an impact on the office leasing market, but we expect that impact to be more subdued in 2022 as landlords and tenants adapt to life with the virus and the general outlook on the ability to manage the effects of the virus continues to improve,” writes Ouvrier.  

He continues, “We also expect that the demand for office space will slowly improve as tenants take advantage of the current tenant-favorable market conditions. However, the largest factors in determining when the office leasing market will rebound are related to the uncertainly surrounding when and how employees will return to working from the office.” 

Ouvrier’s article appears as part of Cox Castle’s 2022 Forecast, which also focuses on the outlook for the retail sector this year.