Areas With Higher Costs Of Living Have Less Office Demand
Expensive housing negatively impacts — or least negatively correlates with — office demand, according to a CoStar analysis.
Net absorption has been deeper in the red in major cities where the median home price is more than $600K, regressing by more than 1% in the last year. Markets where houses are under $600K are at less than half of that. There was no real office demand difference between houses in the $400K to $600K range and those that cost less than $400K.
The same is true for renters, as markets with a median rent price of $2K saw office vacancy rise 1%. These areas include NYC, LA, Boston, Seattle, San Jose and Washington, D.C. Areas below $1,500 saw office demand stabilize.
Eleven of the 12 major markets where the median income is above six figures saw occupancy drop 1%. Long Island is the sole outlier. In places with less than $80K in average annual household income, such as Las Vegas, Miami, Fort Lauderdale, Houston, San Antonio and St. Louis, the office market held fairly steady over the last year.
San Francisco has an outsized impact on the data. It is a high-cost housing market with median home prices up to $1.3M. Its office occupancy has slid more than 4% in the past year, CoStar reports.
And there are some outliers. Miami and Fort Lauderdale have higher rents but positive office demand, as the South Florida office market has been hot since the onset of the pandemic. It is moderating to its pre-pandemic levels, however, and net absorption came in at 60K SF in April, JLL reported.
Chicago, Atlanta and Denver, where apartment rents are on the moderate side, haven't been as lucky, posting negative absorption over the last 12 months.
There is a new push to get workers back in the office. Regulations from the Securities and Exchange Commission and FINRA are behind the recent push for entities like banks to bring their workers back in so their activity can be monitored with higher internet safety measures.
Kastle's Back-To-Work Barometer shows office usage is beefing up, with usage at 60% of pre-pandemic levels in 10 major metros this month — higher than the past two years.
