Office market posts positive net absorption for first time in pandemic era

The office real estate sector continued its recovery through the COVID-19 crisis in the fourth quarter of 2021, with the market registering positive net absorption for the first time since the stateside onset of the pandemic, JLL reported.

The last three months of the year saw 5.4 million square feet of net occupancy growth, breaking a streak of six consecutive quarters of negative national office absorption. The bounce-back into positive territory was led by secondary markets, which posted a combined 2.6 million square feet of expansion. Absorption in gateway cities continues to lag, though JLL noted that Seattle, Boston and New York saw substantial bounce backs and the remaining gateways posted slower negative absorption than they did in quarters prior.

On the whole, leasing activity increased by 9.2% during the quarter, with gross leasing up to 44.6 million square feet. That brought total 2021 leasing to 156.9 million square feet, 14.6% above 2020 levels. As with absorption, gross lease activity remained softer in gateways, but movement in secondary markets more than made up for the lag. Sun Belt cities like Atlanta, Austin, Charlotte, Dallas, Miami, Nashville, Phoenix and Raleigh led the nation, with JLL reporting that several of these markets saw leasing volumes near pre-pandemic levels.

Much of the action that did happen within gateway hubs was driven by technology firms — hardly a surprise, since tech comprised 21% of all quarterly leasing nationwide in the fourth quarter. Meta (formerly Facebook) accounted for 1.1 million square feet of movement by itself, thanks to its suite of leases in Silicon Valley, the San Francisco Bay area and Seattle. Other segments that leased more than a million square feet during the quarter were finance, law and insurance, JLL noted, while life sciences continued to rise up the ranks, rising to sixth among industries in office deal volume.

Notably, leases larger than 100,000 square feet grew substantially faster during Q4 2021 compared to leasing activity on the whole. Such leases increased by 46.6% over the quarter, comprising 43.6% of all activity over the three-month period. That gain, coupled with a rise in leases longer than 10 years, suggests that demand from major tenants is gaining steam; term lengths have now risen for four straight quarters, increasing to an average of 7.8 years per lease.


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