Demand For Office Space Sluggish, Drops To Early 2021 Levels

Demand for office space fell in July to its lowest since early 2021, at just over half of its pre-pandemic level, according to the latest VTS Office Demand Index.

Chicago, Boston and New York City saw the largest declines during the month.

Nationally, the index fell 11 points monthly to 52 in July, representing a 17.5% month-over-month drop in office space demand. 

VTS tracks new tenant tour requirements, both in-person and virtual, of office properties in core U.S. markets. The company says its index is a leading indicator of office space demand. 

“We’re used to seeing demand for office space cool in summer months, but not at this rate," VTS CEO Nick Romito said in a statement.

"Unique to 2022 is an economic outlook that is continually shifting, and is likely contributing to a reduction in new office demand, as uncertainty causes some potential tenants to delay or reconsider their current office space needs,” Romito said.

Separately, Kastle reports that office occupancy in 10 major markets dipped during the last week of August to 43%, down from 43.5% the week before. The company, which gauges occupancy via its access control systems in about 2,600 buildings nationwide, chalked up the drop to summer vacations, and predicts an increase in occupancy after the Labor Day weekend.

A number of companies are pressing workers to return to their offices more often, with mixed results so far. On Tuesday, investment banking giant Goldman Sachs told workers it will no longer require vaccines against Covid, testing or masks. The company also expects its employees to come into the office five days a week, the New York Post reports.