As we’re all well aware by now, the national office space sector is grappling with a host of problems resulting from trends in remote work, increasing interest rates, widespread job cuts, and the reduction of office space. Measures such as office vacancy and occupancy rates are often discussed when assessing the health of office markets. However, comparing office sales to office leasing can also provide interesting perspectives.
Office sales, similar to leasing volume, have shown a decline in recent months. As per data from Yardi Matrix, office sales in the U.S. have reached $9.4 billion so far this year, indicating a significant reduction in sales activity compared to the first quarter of 2022 when the national sales volume exceeded $20 billion. Following a major slump in the second quarter of 2020, office sales volume saw a peak in the fourth quarter of 2021 at $40 billion, before stabilizing at around $25 billion throughout the first three quarters of 2022.
| Market | Total Sales Volume YTD | Leasing Activity YTD |
|---|---|---|
| Boston | $721 million | 1,548,017 |
| Manhattan | $699 million | 5,074,796 |
| Greater Los Angeles | $629 million | 2,659,742 |
| Washington, D.C. | $509 million | 1,125,514 |
| Chicago | $354 million | 2,841,337 |
| Dallas | $329 million | 2,029,337 |
| San Francisco | $316 million | 1,180,883 |
| San Diego | $307 million | 566,044 |
| Phoenix | $270 million | 1,406,789 |
| Miami | $207 million | 641,724 |
Large office transactions are having a greater impact on market sales volume, like in New Jersey, which has been the second most active market in 2023 so far, accounting for $807 million in office deals. But that figure is mostly driven by Veris Residential’s sale of a three-building office complex with 1.9 million square feet in Jersey City. Among some of the largest office markets in the country, Boston has had the highest total office sales volume this year, with $721 million. Manhattan has the second highest number of office sales, with $699 million. Greater Los Angeles, Washington, D.C., and Chicago round out the top five.
When comparing cities’ sales volume numbers to leasing figures, there’s an uneven correlation. Of the 10 major markets measured here, Manhattan has the second highest sales volume and the highest leasing volume. Boston, with the highest sales volume, is right in the middle in terms of leasing volume. Chicago has the second highest leasing volume but is fifth in terms of sales.
It’s worth noting that the size of a market makes a difference when looking at the numbers. Manhattan’s office market has a total of roughly 400 million square feet, so while a leasing volume of 5 million square feet is nearly twice as much as the runner-up city, Chicago, with 2.8 million square feet, Manhattan’s leasing volume has been tepid, recording a seven-quarter low in the first part of 2023.
Boston, which has the highest number of sales of those tracked, also has by far the most office space in development with 14.76 million square feet under construction as of April, according to CommercialEdge data. Leasing volume in the city is less than other big markets, but that could have to do with the slumping life sciences sector, one of the largest industries in the city and one which has been hit hard by the drop in VC funding.
Miami’s office market has been on a hot streak the past couple of years, as more companies choose to relocate to the sunny South Florida city. After a banner year in 2022, both sales and leasing activity dropped significantly in the first quarter of this year, driven by worsening economic conditions. There are a lot of factors both national and local that impact the office market numbers in each city. These leasing and sales figures are interesting to look at side-by-side, but digging a little deeper into each city brings more clarity to what’s behind the numbers.
