Amazon and WeWork were among the leaders in office leasing from August 2016 through July 2017, according to data provided by CoStar’s Portfolio Strategy team to the National Real Estate Investor Online.
NREI Online revealed top office leasing activity over nearly a year, as well as the trends driving that activity, in “The 10 Most Active Office Tenants in the U.S.,” published last month.
Paul Leonard, Managing Consultant on the CoStar Portfolio Strategy team, explained that two driving forces in the tech economy—e-commerce titan Amazon and co-working giant WeWork—are driving much of the recent office leasing activity in the United States.
“Amazon has been growing its real estate footprint aggressively this cycle as the company continues to expand,” he explained. “Generally, the tech sector has led the demand for office space since the end of the Great Recession, so it makes sense that a tech tenant would be at the top of the list. However, even tech has seen a deceleration in demand over the past year.”
Through the first half of 2017, net absorption of office space was down 26 percent compared with the first half of 2016, Leonard says.
“With the labor market tight due to already very low unemployment and a shrinking working age population, we believe demand will continue to decelerate over the next few years even if we do not face a recession,” he says. That includes the tech sector, which has experienced a slight year-over-year decline in demand, he adds.
While overall demand is slipping, CoStar has seen a surge in office leasing activity involving class-A space, suggesting that tenants are favoring quality over quantity. Sixty percent of office leasing activity has focused on four- and five-star office buildings, even though those categories make up only 30 percent of total inventory, Leonard says.
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