America's Property Tax Advisor

Office Recovery Underway


Nationwide, businesses are taking a variety of approaches to bringing employees back into offices. Some companies brought their people back last year, more came back after Labor Day, while some are taking a wait-and-see approach for now.


What does the disruption in regular office hours mean for the industry now and for the future? The topic was addressed in a recent webinar sponsored by Jones Lang LaSalle commercial real estate services company.


Leading Indicators are Up


Leading indicators of an office recovery have shown sustained upward momentum until the recent dip with the Delta variant. JLL’s “comeback index” combines 12 indicators to provide a proprietary analysis on how close the country is on a return to normalcy. It provides a weekly snapshot that acts as a guide to help companies who occupy and invest in office real estate.


“Our comeback index, which tracks tangible data such as office entry badge swipe rates, leasing activity, lease term, TSA checkpoints, unemployment claims and more, showed that we hit a peak of activity and office usage in July. The index retracted a bit in the last two months,” said Ben Breslau, JLL Chief Research Officer, in prepared remarks.


“While we expect some additional short-term delays from Delta that could push another sustained wave of office recovery into the first quarter of 2022, we don’t foresee a prolonged pause given the greater level of immunity through vaccinations and the momentum we see in other sectors.”


Leasing Activity Rises


Leasing volume increased in the third quarter by 7.8% from the second quarter to 39.2 million square feet. Additionally, leading indicators such as lengthening lease terms, demonstrate some confidence in the market and in tenant intentions to use office space long term.


In the third quarter, leases of at least 5 years in length accounted for nearly 70% of all activity and 43% of leases were at least 10 years in term.


“We’re not seeing any reduction in office space demand. And if there is, it’s offset by companies needing more space for employee collaboration and for adding new hires,” said John Gates, CEO, Americas Markets JLL.


JLL’s view is that in aggregate, the initial impact of the pandemic will be relatively minor, but there will be demand variations across the board depending on location, employee amenities and potential new construction. These demand variations will be key to office property tax assessments in the coming year.