We'll soon start to see the first meaningful decline in direct rents and property values in more than a decade.
While demand has remained relatively flat, total available space rose to a record high of 86 million square feet.
With a record amount of space, landlords have found very little pricing power. As such, office rents stagnated in the third quarter of 2020 and are expected to decline in 2021.
With new construction, more subleases, and lower demand, the average vacancy rate is expected to increase to 13.5% by mid 2021, the highest level since 2013. Vacancy is expected to remain elevated until 2022.
As rents drop, so will the corresponding property values. Prices are forecast to fall by 10% in 2021, before returning to pre-pandemic levels in 2022.
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December 18, 2020
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