Live Markets: Cushman & Wakefield sees office vacancy peaking in 2025

Cushman & Wakefield

12/12/2023 15:41

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    CUSHMAN & WAKEFIELD SEES OFFICE VACANCY PEAKING IN 2025
    Real estate services firm Cushman & Wakefield in its 2024
U.S. outlook released this week said it sees the economic
landscape as a rolling recession, with real estate,
manufacturing, transportation and warehousing, and finance as
areas currently experiencing some version of a recession.
    In office real estate, the firm says, "after peaking in Q1
2020 at 135.2 million square feet (msf), the office construction
pipeline has receded by more than 50%, sitting now at 63.5 msf
with little promise of a pickup anytime soon." 
    It sees U.S. office vacancy peaking in early 2025 at 21.5%,
up another 210 basis points (bps) from the current 19.4%. It
says effective rents will decline another 5.4% in 2024, bringing
the total expected peak-to-trough decline to 23%.
    Cushman & Wakefield’s modeling suggests that by 2025 "most
firms will have completed their downsizing as it relates to
hybrid and remote work, allowing for the relationship between
job growth and demand for office space to reestablish itself,
and the office sector will begin to register positive absorption
once again."
    In retail real estate, limited supply will cap how high
retail vacancies will go, according to the firm. "The resilience
of U.S. consumers has been a key ingredient supporting economic
growth and the CRE retail sector this year," the firm noted. 
    "The number of announced retail store openings year-to-date
is outpacing closures by a margin of 1,000, thanks primarily to
the nearly 1,800 net openings in the discount sector alone."
    In the multi-family dwelling market, the firm said that
"despite an unprecedented supply wave, the apartment market is
enjoying a solid year characterized by healthy rental demand and
positive rent growth."
    "Macroeconomic and demographic factors have contributed to
resurgent demand this year. Amid sharply higher mortgage rates
and buoyant single-family home prices, the economics of renting
versus owning have never been more favorable."
    
    (Caroline Valetkevitch)
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