CoStar Upgrades U.S. Office Vacancy and Rent Growth Forecast

Phil Mobley, National director of office analytics at CoStar Group

“The latest forecast calls for a continuation of the slow-but-steady revival, with an ongoing supply-side adjustment offsetting historically weak office demand growth”

Phil Mobley, National director of office analytics at CoStar Group

“Office rent performance has been surprisingly strong over the past year despite high vacancy, likely because office supply growth has slowed substantially, limiting the availability of space in the most desirable buildings.”

Phil Mobley, National director of office analytics at CoStar Group

“As a result, the upgraded projection for office rent growth has less to do with the overall reduction in supply caused by the removal of non-competitive space and more to do with the dramatic slowdown in new construction.”

Phil Mobley, National director of office analytics at CoStar Group

“Risks to the revised outlook appear balanced in terms of probability, though the magnitude of the downside risk seems larger”

Phil Mobley, National director of office analytics at CoStar Group

“Persistent inflation and higher interest rates could slow economic growth further and precipitate additional business cost-cutting even in an environment of continued economic expansion.”

Phil Mobley, National director of office analytics at CoStar Group

“Furthermore, the recent productivity gains evident in knowledge work could accelerate with further adoption of artificial intelligence, resulting in lower demand for some types of knowledge workers.”