Whether due to another wave of the pandemic, the highest inflation in decades or geopolitical uncertainty, demand among U.S. office tenants continued to cool down in February.

CBRE's U.S. Leasing Index dropped by 18 points in February to 76, the firm said Thursday, the sharpest month-over-month decline in leasing activity since the Dallas-based real estate services giant began tracking the data in March 2020, with the largest drops in leasing activity seen in Seattle, Atlanta and Denver.

CBRE developed the index to chart the pace of recovery amid the pandemic among the 12 largest U.S. office markets. The firm tracks three metrics: leasing activity, sublease availability and tenants in the market by aggregate square-foot requirements.

“Uncertainty in the market from either the pandemic, inflation or geopolitical events can have a cooling effect on office-market activity,” CBRE Global Head of Occupier Research Julie Whelan said in a statement.

Dallas/Forth Worth and San Francisco were the only top 12 cities not to see their leasing activity decline in February, although both were flat month-over-month, and Denver and Seattle, despite significant drops, were still among the most active office markets in the country, according to CBRE.

Despite the overall drop, authors of the report, including Whelan and CBRE Global Chief Economist Richard Barkham, wrote that they expect office demand to stabilize in the near term as more companies encourage employees back to the office because of improving Covid conditions and a resurgent U.S. economy.

Tenants were searching for space in Houston, Boston and Dallas in numbers not seen since before the pandemic, while office landlords in Manhattan, Denver and Seattle were fielding prospective tenant demand near pre-pandemic levels, CBRE said. Tenant demand either increased or remained stable in the rest of the markets tracked by CBRE.

Landlords hoping for a quick rebound in physical occupancy of their office buildings this month have so far been disappointed — the average office occupancy in the top 10 markets was 39.5% of pre-pandemic levels on March 16, a slight dip from the week before.

“There is cause for optimism, though, that the sustained level of activity by companies seeking new office space will translate to more leasing activity in the months ahead,” Whelan said in the statement.