National Market Reports

National Office Market

The U.S. office market slowed materially during the second quarter of 2020 as the economic downturn precipitated by the COVID-19 pandemic softened demand for space. Absorption was negative for the second consecutive quarter after 39 straight quarters of positive net demand; the nation saw occupancy decline by 11.1 million square feet during the second quarter of 2020. Asking rents are 3.5% higher than at the second quarter of 2019, driven in part by deliveries of top-quality product, but asking rent growth is now plateauing and concessions are placing downward pressure on effective rents. Vacancy increased 40 basis points over the past 12 months, and approximately 6.9 million square feet of new product delivered during the second quarter of 2020. The amount of space under construction reached a new cyclical high and presents a challenge for asset owners in the year ahead. However, the duration of the pandemic and the speed of an economic recovery, rather than the construction pipeline, will be the greatest influences on market conditions during the balance of 2020 and into 2021.

National Industrial Market

The U.S. industrial market continued to expand in the second quarter of 2020. Although demand slowed, asking rents increased and vacancy remains low. Absorption was positive but decelerated in the second quarter in response to a lack of available product as well as concerns about the global economy amid the COVID-19 pandemic. However, industrial construction remained robust in the second quarter, as developers seek to capitalize on the persistent, stout demand for modern distribution space—demand that has been accelerated by the power of e-commerce during the pandemic and the momentum to return more supply chain activities to the U.S. The global health emergency has placed greater emphasis on logistics, warehouses and distribution centers. As states begin to reopen their economies—something being delayed by additional outbreaks of the coronavirus in July—some of the habits that consumers adopted during the pandemic, such as greater reliance on e-commerce, are likely to persist.