To Occupy or Not to Occupy: Data Results for Q3 2021 Office Space
Industry News | Office
by Shelly Branscom, CCIM
As we wind down 2021, I am feeling every grateful for the business opportunities and transactions I have consummated this year. Let’s take a look some statistics from 3rd Quarter.
According to Colliers International, the office vacancy has declined for the second straight quarter to 14.02% from 15.88% at the end of last year. This is the lowest vacancy Albuquerque has experienced since 2009. A handful of moderate office leases in primarily suburban office buildings caused this reduction. Tenants are seeking shorter terms (3-4 years) and early termination options creating the highest amount of flexibility for themselves. The average office asking lease rate stabilized during Q3 mirroring the year over year averages seen in 2019 & 2020. As we continue in this uncertain market, Tenants are also taking into consideration employee safety and functionality of their office space.
The unemployment rate continue to trend downward landing at 6% in Albuquerque up from 4.6% in February, 2020. Oil and gas revenues as well as increased consumer spending are likely causing New Mexico’s GDP to increase 4.14% in 2020 to 19.27% which is expected to trend through 2023.
Moody’s Analytics predicts office vacancy nationwide has hit its lowest point and is inching upward as analysists begin to see light at the end of the tunnel. The good news is Moody’s is also reporting there is historical evidence that office values have held relatively steady over the last 40 years, despite major ups and downs.
Kastle Systems Data reports office occupancy reached its highest level nationwide (36.2%) since the pandemic began proving we are slowing going back to the office and increasing productivity. Vaccine mandates have aided in a continue uptick in the workforce returning to the office. Office foot traffic jumped another 19% now at 25% - the highest since the pandemic started. Media and Telcom lead the Industry in office returns while Government took the lead in how often employees come to the office.
As organizations grapple with accommodating new regulations and guidelines, it has become evident that flexibility is a central ingredient to building a productive and engaged workforce. It is more important than ever for leaders to have insight into how their employees are using the office and it resources to enhance the workplace experience for today’s workforce.
4th Quarter projections - With the Federal Reserve expected to hold interest rates through 2023, analysists expect consumer spending to be strong this holiday season. Office vacancies rates are expected to continue to decline while construction costs continue to rise due to lack of availability of product and of laborers. Asking rental rates will likely inch in the upward direction as vacancy levels continue to decline. SIOR reports despite reportedly high development costs, this is the most profitable time to build investment real estate.
Shelly Branscom, CCIM is an NAI SunVista commercial real estate specialist who provides substantial long-term strategies and business planning services to her clients. She prides herself on thinking outside the box, enabling her to contribute unique solutions and outcomes specific to each of her clients. Learn more about Shelly and her listings.
NAI SunVista is a full-service commercial real estate company serving New Mexico since 1996. The company is a dynamic commercial real estate firm offering best-in-class real estate services in brokerage, property management, asset management, business brokerage and development services.