Net demand for office space during this recession now totals negative 153.1 MSF, far eclipsing the negative 92.4 MSF recorded during the Global Financial Crisis a little more than a decade ago. A recent article on Colliers’ Knowledge Leader blog observes that, while net demand remains negative, it was markedly less so in Q2 2021. U.S. office net absorption was negative 18.6 MSF, a huge figure to be sure, but also a significant improvement from Q1 net absorption, which was negative 46.1 MSF.
There is little doubt that overall demand for office space will remain negative for a while longer, especially if the Covid-19 Delta variant or others prompt additional lockdowns. Yet, signs of recovery are emerging. Colliers research finds that just over a third of the U.S. markets surveyed recorded positive net absorption in Q2 2021.
Notably for the federal government, however, Washington, DC, is still struggling, recording about 1.5 MSF of negative demand in Q2. Much of that softening is driven by GSA leased space downsizing. Further, after 18 months of maximum telework in many agencies, the OPM produced a report in late July calling for permanent expansion of workplace flexibilities that promise to affect office space demand in the long term.
This is perhaps the best opportunity in a generation for GSA to strike phenomenal lease deals, especially long-term contracts, yet short-term extensions are now more prevalent. All indications are that the window will close before the federal government can implement a space strategy to capitalize on current market conditions. More on that in a future article.