Need a report that reflects how COVID-19 has impacted this market and its growth?
The US office sector was severely affected by the COVID-19 pandemic, and it may take a while to recover. The third quarter of 2021 was promising for the US office market. The vacancy rate was stabilizing, sublease space was decreasing, and net absorption was positive for the first time in Q3 2021 since Q1 2020.
The property markets also faced the impact of the pandemic. Enterprises and frontline workers had to overcome many obstacles to stay in business. Almost every property industry was compelled to make drastic changes, especially the retail sector. To accommodate rising consumer demand and overcome acute shortages, retailers swiftly built up their home delivery and curbside pickup services while restructuring their supply chains. Many people who work from home have had to adjust their living environments on the go. The emerging trend of the year is "flexibility."
Scope of the Report
Office real estate is the construction of buildings for leasing and selling purposes to companies from different sectors. This report aims to provide a detailed analysis of the US office real estate market. It focuses on the office real estate sector's market insights, dynamics, technological trends, and government initiatives. Also, this report covers segmentation by region (Northeast, Midwest, South, and West) and sector (information technology (IT and ITES), manufacturing, BFSI (banking, financial services, and insurance), consulting, and other services). Moreover, it analyzes the key players present in the market and the competitive landscape in the US office real estate market.
Key Market Trends
Leasing Volume Increased in Q3 2021
Gross lease volumes increased by 7.8% in Q3 2021, topping 40 million sq. ft for the first time since the outbreak. As a result, total transactions were up by 1.7% from the same period the previous year. However, they are still 43.8% lower than in 2019. Due to flexible business rules and individual and corporate shift toward affordability, lower-cost secondary markets in the Sun Belt and the West dominated this quarter, with 18.7% growth in leasing compared to 7.5% growth in gateway geographies.
The unemployment rate dropped to 5.2%, a new post-pandemic low. However, labor participation remains low as workers continue to be concerned about the COVID pandemic. The relationship between job growth and office space requirements may become less connected with emerging hybrid and remote work models.
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Office Investment and Rental Rates
For real estate investors, offices are one of the most important asset groups. The US office real estate investment market was valued at USD 24.4 billion in the second quarter of 2021. Rents have steadily grown in recent years, and they are expected to continue to grow in the future. According to the office rental index, as of September 2021, gross rents grew by almost 24% since the index was established to 100 in 2008. Manhattan, NY, and San Francisco, CA, were the costliest office markets, with yearly sq. ft rents of USD 128 and USD 95, respectively.
When demand for office space recovers, newly completed buildings may attract an even greater number of tenants. Office occupants will be looking for the most up-to-date health and wellness systems and certifications. Since the pandemic, developers have been less eager to start new projects. Amid the crisis, demand was stifled. Basic construction expenses have risen dramatically due to the pandemic. Since Q2 2020, construction starts have been below 15 million sq. ft, similar to the 2012-2013 period, following a supply boom of over a million units.
The US office real estate market is relatively fragmented. The report covers the major companies in the US office real estate market. Large firms have financial resources to their advantage, whereas small businesses can compete effectively by building in local markets. Some of the office real estate developers in the United States are Turner Construction Company Inc., Kiewit Corporation, Hensel Phelps Construction, Gilbane Building Co., and Skanska USA Inc.
July 2021: Realty Income Corporation and VEREIT, both of which own commercial real estate portfolios, saw their share prices crash in spring 2020 due to the lockdown. Share prices have since recovered, allowing the two parties to proceed with the USD 17 billion merger.
July 2021: Blackstone Group bought QTS Realty Trust for USD 8 billion. Blackstone Real Estate Income Trust acquired Home Partners of America for USD 6 billion.
Table of Contents
1.1 Study Assumptions
1.2 Scope of the Study
2. RESEARCH METHODOLOGY
2.1 Analysis Methodology
2.2 Research Phases
3. EXECUTIVE SUMMARY
4. MARKET INSIGHTS
4.1 Current Economic and Real Estate Market Scenario
4.2 Government Regulations and Initiatives in the Industry
4.3 Technological Innovations in Office Real Estate Market
4.4 Impact of Remote Working on Space Demand
4.5 Insights into Office Real Estate Construction Costs
4.6 Insights into Key Office Real Estate Industry Metrics (Supply, Rentals, Prices, Occupancy (%)/Vacancy (%))
4.7 Insights into Rents, Leasing, and Rental Yields in the Office Real Estate Segment
4.8 Insights into Key Trends on Rental and Leasing
4.9 Impact of COVID-19 on the Market
5. MARKET DYNAMICS
5.1 Market Drivers
5.2 Market Restraints
5.3 Market Opportunities
5.4 Porter's Five Forces Analysis
5.4.1 Bargaining Power of Suppliers
5.4.2 Bargaining Power of Consumers/Buyers
5.4.3 Threat of New Entrants
5.4.4 Threat of Substitute Products
5.4.5 Intensity of Competitive Rivalry
5.5 Industry Value Chain Analysis
6. MARKET SEGMENTATION
6.1 By Region
6.2 By Sector
6.2.1 Information Technology (IT and ITES)
6.2.3 BFSI (Banking, Financial Services, and Insurance)
6.2.5 Other Services
7. COMPETITIVE LANDSCAPE
7.1 Company Profiles
7.1.1 Turner Construction Company Inc.
7.1.2 Kiewit Corporation
7.1.3 Hensel Phelps Construction
7.1.4 Gilbane Building Co.
7.1.5 Skanska USA Inc.
7.1.6 PCL Construction Enterprises
7.1.7 Dpr Construction
7.1.8 Hitt Contracting
7.1.9 B.L. Harbert International
7.1.10 Trammell Crow Company
7.1.11 Clayco Inc.
7.1.12 Ryan Companies US Inc.
7.1.13 Structure Tone LLC*
7.2 *List not Exhaustive
8. RECENT DEVELOPMENTS
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Frequently Asked Questions
What is the study period of this market?
The United States Office Real Estate Market market is studied from 2018 - 2027.
What is the growth rate of United States Office Real Estate Market?
The United States Office Real Estate Market is growing at a CAGR of 4% over the next 5 years.
Who are the key players in United States Office Real Estate Market?
Turner Construction Company Inc., Hensel Phelps Construction, Gilbane Building Co., Balfour Beatty LLC, Simon Property Group are the major companies operating in United States Office Real Estate Market.