Q1 2022 office reports issued from several national brokerage firms focused on similar themes. Specifically, negative absorption, combined with slowly-increasing office utilization. Cushman & Wakefield’s report acknowledged that the quarter was marked by “challenges in the U.S. and abroad,” with international geopolitical issues and national economic problems creating massive amounts of uncertainty. But Cushman & Wakefield analysts pointed to optimism on the office side, due to the fact that “in general, the engines that drive demand for office space to continue to steadily improve.”

JLL also provided an optimistic viewpoint, noting that tech-sector expansion and sublease stability led to a market that “demonstrated signs of durability and resiliency since hitting a trough in late 2020.” Though absorption was relatively flat, removal of most COVID mandates and restrictions is helping companies “set clearer targets for office re-entry,” with flight to quality still dominant.

Meanwhile, CBRE pointed out that “new office starts have moderated amid elevated vacancies and rising construction costs, which should help to reduce future supply-side pressures,” even as job growth continue booming.

Newmark analysts weren’t quite so positive, pointing out hat while public health improvements and increased return-to-office planning is spurring “pent-up leasing demand,” new construction deliveries and existing oversupply in many markets, combined with the impact of remote work, “could negatively impact firms’ real estate needs.

Continuing on this theme, Newmark believes economic conditions could be uneven for the remainder of 2022. Even as “continued labor market expansion is expected and may support the net-new office occupancy in markets with fast-growing industries like technology and computer science,” inflation is likely to remain elevated, presenting “market-wide challenges, which could influence interest-rate hikes and recessionary pressures.”

The other three brokerages agreed that job and wage growth would increase. “As employment and wage growth, as well as consumer spending, jobless claims and investment activity remain robust and will keep demand buoyant in spite of headwinds,” JLL analysts noted. Added CBRE researchers: “Office-using jobs are above pre-pandemic levels and continue to grow at an impressive pace, which should support demand for space as health conditions improve and more employees return to the office.”

Meanwhile, optimistic Cushman & Wakefield analysts also liked the prospects of improved job growth, indicating that office net absorption should follow suit. Both JLL and Cushman & Wakefield believe that the office recovery will be bifurcated, with differentiation by building class and submarket.