Landlord Concessions Fell In 2024, Another Sign Of Office Market Turnaround

Concessions given to office renters decreased on average in 2024, the first time they have done so since CBRE began tracking them in 2019.

Concession packages peaked in 2023, when they included a tenant improvement allowance of $97.55 per SF and 9.6 months of free rent on average, according to a CBRE analysis of 4,350 leases in 12 markets nationwide. 

“The decrease in concessions last year is another sign of stabilization and nascent recovery in the office market,” CBRE President of Americas Investor Leasing Mike Watts said in a statement. 

Although both metrics declined in 2024, they remain about 30% higher than they were in 2019. 2024 saw an average tenant improvement allowance of $87.51 and 8.9 months of free rent, well above $63.67 and 6.7-month averages in 2019. 

There is a split in the market when considering top-tier versus lower-tier buildings, CBRE found. 

Effective rents for top-tier buildings rose by 5.2% in 2024, owing to those landlords reducing concessions and to their ability to raise their base rents based on demand. 

But in so-called lower-tier buildings, effective rents decreased by 1.2% in 2024, CBRE found.

The average tenant improvement allowance for top-tier assets fell by 10% in 2024 to $92 per SF, but those for lower-tier assets fell by 16% to $73 per SF.

CBRE attributed the steeper drop in less desirable buildings to “the inability of some owners of lower-tier buildings to continue offering generous concession packages amid a high-interest-rate environment in which building values are depressed, debt structures are challenged and capital sources are limited.”