Office Real Estate Market Size

Office Real Estate Market Analysis

The Office Real Estate Market size is estimated at USD 2.10 trillion in 2024, and is expected to reach USD 2.71 trillion by 2029, growing at a CAGR of greater than 5.17% during the forecast period (2024-2029).

The market is driven by the growing demand for offices by the new companies entering the market. Furthermore, the market is driven by the increasing demand in the European and GCC markets.

• Office space absorption in the leading office real estate markets remained negative in the first quarter of 2022, which means that more space was vacated than leased. In San Francisco, California, the hub of American technology, as well as Manhattan, New York, the center of American finance and location of the New York Stock Exchange, these circumstances prevailed. The vacancy rate in Dallas and Houston, Texas, was higher than 29%. The COVID-19 outbreak led to the closure of offices, resulting in a decrease in demand for traditional office spaces. Many companies downsized, switched to a hybrid working style, didn't renew their leases, or put off plans to expand their office space. As a result, leasing activity decreased, and vacancy rates increased.
• Investment activity decreased during the start of the COVID-19 pandemic but surged in 2021 and nearly returned to pre-pandemic levels. Despite the swings, rents have been growing gradually in recent years and are likely to keep doing so. The office rental index shows that as of September 2021, gross rents had increased by more than 24% since the index's base value of 100 was created in 2008. The most expensive office markets were in Manhattan, NY, and San Francisco, CA, with annual square footage rents of 129 and 97 dollars, respectively.
• The COVID-19 pandemic significantly reduced lease activity in the European office real estate market in 2020 and 2021. Although take-up in both years fell short of the five-year norm, there was a noticeable increase in the second half of 2021. The take-up of 4.31 million square meters in the first half of 2022 indicated that the European office market is on the fast track to recovery. Some of the busiest office real estate investment markets in Europe continue to be seen in the big four German cities of Berlin, Hamburg, Munich, and Frankfurt, as well as Paris and London. Office space in Metro Manila, Philippines, cost 1,037 Philippine pesos (19.01 USD) per square meter per month in the second quarter of 2022. About 47.4 thousand square meters of Grade A office space were added to the Metro Manila stock during the same quarter. However, office real estate properties typically do not receive the same tax incentives as residential properties do, so property taxes, rental taxes, and the lack of loan repayment rebates may be a factor for potential investors to consider.