The commercial office market is yet to be affected by the economic turmoil caused by the coronavirus crisis, according to the newly released Yardi Matrix commercial office data.
The report showed that the average full-service equivalent listing rates were $38.39 in June, up 14 cents from May but were down 10 basis point from a year ago. However, due to soaring unemployment levels and the resurgence in COVID-19 cases, Yardi predicted that shifting office employment levels and workplace safety concerns will definitely impact the market for the rest of the year and possibly beyond.
Office-using employment rose by 347,000 jobs in June, but total employment in office-using sectors was still below its February peak at 2.4 million.
“With cases of the coronavirus spiking in many states, it is uncertain whether the job gains will continue through the summer. Many businesses are undergoing hiring freezes, so gains in the near term will be more reliant on the ending of furloughs than on rehires,” Yardi Matrix said in the report.
Supply remained stable. The first half of the year saw 26.1 million square feet of office space completed, divided almost equally between suburban offices and urban locations. Despite the pandemic, the year could still reach the 2019 record of 76 million square feet of newly delivered office space, according to the report.
Sales volume slowed down, but prices were yet to fall. Sales totaled $28.4 billion on the first half of the year, $22 billion of which occurred in the first quarter. Office properties have sold at an average of $290 per square foot in 2020, up $17 year over year.
“Coworking will almost certainly look different post-pandemic,” the report said. “The overall industry faces an uphill climb when COVID-19 finally subsides. On top of the challenges that all offices have to address in reopening, coworking spaces will need to go the extra mile to make members feel safe in a shared environment. Communal spaces, a central selling point of many coworking operators, become a hindrance in a post-coronavirus world. However, there is optimism that coworking spaces will see increased demand during the months coming out of the pandemic. Some smaller firms have let office leases expire as they adapt to long-term remote work situations. Whenever the country begins to return to a sense of normalcy, many of these companies may look to coworking to bridge the gap between working from home and finding a new permanent space.”