Demand for office space weakened across the country in June as widespread inflation and other economic pressures have made tenants think twice about committing to long-term leases, according to CBRE.
The company’s U.S. Leasing Activity Index dropped 4 points month over month to a reading of 91 in June. The decline left the index down 8 points since January, although it remained up 15 points compared to June of last year.
The index tracks leasing movement in the top 12 office markets in the U.S., each of which is tracked on a component subindex. These components are then averaged to determine a national index reading. The overall index is benchmarked to a reading of 100, representing the average amount of leasing activity in 2018 and 2019.
Just three of the 12 markets tracked by CBRE saw leasing activity increase in June — San Francisco, Seattle and Dallas/Fort Worth, although the index levels for the first two metros stayed well below their pre-pandemic baseline. Boston, with an index reading of 196, remained atop the 12-city rankings by a wide margin in June. Los Angeles, with an index reading of 128, surged past Atlanta (which had a June reading of 125) to take second place.
San Francisco continued to bring up the rear with a reading of 45. The City by the Bay has had the lowest index reading since November 2021.
The index is one of three created by CBRE to gauge office-market activity each month. The other two indices track the space requirements of active tenants in the market and sublease availability. Taken together, the company uses the three metrics to evaluate office demand, assessing when and where momentum in demand may be shifting. Each of the other two component categories are led by Houston. When combining the three indices, Boston leads the 12 cities in CBRE’s office-market recovery scale, followed by Dallas/Fort Worth, Los Angeles, Houston and Manhattan.