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This study addresses the state of U.S. office leasing concessions. Key findings of the report include:

  • U.S. office market conditions are substantively similar to those of 2006, with the exception of a significant reduction in net absorption.
  • Despite market fundamentals shifting in favor of owners over the past several years, average concessions for Class A space in major U.S. downtowns have risen significantly during this time period. Since 2008, average tenant improvement allowances per square foot and average months of free rent per year of term have risen 66% and 73%, respectively. Meanwhile, average starting rents also have risen, albeit at a much slower rate of 21% over the same time period.
  • The demand patterns for office space in the U.S. have shifted significantly over the past several years as changes in space utilization and trends toward densification, consolidation, and space efficiency have all impacted how much office space tenants require. The result has been robust competition for large tenants as a slowdown in demand for office space has yielded muted net absorption and rising concessions. These conditions have occurred despite other market metrics performing well.

The report includes an analysis of current and future office leasing conditions for 12 major U.S. cities with a focus on trends in concessions. The study concludes with suggested action steps for owners and tenants regarding how to respond to the changing nature of concessions.

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