Office Leases Are Shrinking In Size And Length
You don’t have to go home, but you probably won’t be staying in the office full time.
The total impact of the pandemic on the office market is becoming clearer, and the takeaway is an ever-shrinking footprint combined with shorter average lease terms than in 2019.
New office leases inked in Q3 saw a massive drop-off — the lowest number signed over the last six quarters, with 18% fewer deals than in Q3 2021 and 15% fewer than Q3 2019, according to CoStar.
The average square footage of an office lease has also dipped considerably over the course of 2022, dropping by 16% compared to 2019 numbers. The average lease size in the first three quarters of 2019 clocked in at just over 4,500 SF. In 2022, it fell to just over 3,800 SF, CoStar reported.
In its Q3 Office Outlook report for 2022, JLL also found a significant dip in the length of an average office lease, with tenants increasingly requesting shorter terms. While there was a short period where lease terms grew to an average of 9.1 years, by Q3 of this year, the average lease dropped to 6.2 years.
Office downsizing is a common cost-saving measure as the economy worsens. The U.S. Patent and Trademark Office dropped 800K SF at its headquarters in one of the more notable examples of shrinking footprints.