- Long-suffering US office REITs are finally seeing the light at the end of the tunnel. Leasing volume has picked up and tenants are more willing to commit to long-term leases.
- New construction has petered out and occupancy could recover to pre-pandemic levels by 2027. Upcoming rate cuts would support a continuation of the recovery.
- - Read this at SGinvestors.io -
Pick-up in leasing as confidence is restored.
- Leasing volume increased 7% y-o-y and 15% q-o-q in 2Q24, reaching 90% of pre-pandemic levels. Demand bottomed out in 1Q23 and rose steadily over the next five consecutive quarters. Renewals accounted for 45% of leasing volume as tenants avoided incurring out-of-pocket build-out costs. Tenants have shown more confidence in signing long-term leases in recent quarters.
- - Read this at SGinvestors.io -
Reaching a new equilibrium.
- Major tenants have cut office space by an average of 11.4% over the past 12 months when their leases expire. 60% of leases were signed before the COVID-19 pandemic and are subject to future downsizing. Nevertheless, many tenants have reached their targeted office footprint.
- Downsizing has gradually diminished as office space per employee stabilised at 147sf, down 9% from pre-pandemic levels. Some tenants have also started to expand their footprint.
Office construction at historic low.
- Read more at SGinvestors.io.
