Office leasing is still at 70% of pre-pandemic levels; demand should recover in early 2022. The total number of leases signed is now close to pre-pandemic levels, but fewer tenants are leasing large blocks of space. Chicago saw a reduction in office sublease space in the second quarter. Office investment activity is about half of typical levels across most US markets, but we haven’t yet seen a significant drop in prices. Fewer than 1 in 10 companies is now considering deep cuts to its office portfolio, according to a survey by CBRE.
Demand for warehouses and other industrial buildings shattered sales, leasing, and construction records at mid-year. Leasing by total square footage was up at least 30% to 40% in the quarter from pre-pandemic levels in the nation’s logistics and manufacturing hubs. Leasing increases paired with industrial rent growth exceeding 5% in most large cities caused investors to shell out at least $29 billion to buy property, also the highest total ever recorded at the end of a second quarter.
In the multifamily market, rent growth is on a tear compared to most recent years. Rent growth in the suburbs is outpacing downtown rent growth. As workers return to the office, rents for smaller units are rising again. One-bedroom rents are up about 7.5% nationally since the start of 2021. High demand, and a slowdown in new supply, will keep pricing power in the hands of building owners. Deal volume is up, too, as the total multifamily deal volume in the first half of 2021 almost matches the record-high first half of 2019, and it surpasses the total amount of trades that closed in 2020.