NEW YORK--(BUSINESS WIRE)--Office demand emerged from the slower winter months with an exceptionally strong start to the busier spring season. According to the latest VTS Office Demand Index (VODI), national demand for office space rose 31.3 percent from February to March, exceeding the month-over-month March growth recorded in pre-pandemic 2018 and 2019. The VODI tracks unique new tenant tour requirements, both in-person and virtual, of office properties in core U.S. markets, and is the earliest available indicator of upcoming office leasing activity as well as the only commercial real estate index to explicitly track new tenant demand.
Nationally, the VODI jumped 15 points to a level of 63 in March, shifting away from its relatively stable levels seen in the past few months. The VODI maintained a level of 46 in December and January, and 48 in February. Despite its strong performance this year, the March VODI was still down 4.5 percent from its level a year ago. However, the year-over-year gap has narrowed significantly. In February, the VODI was down 12.7 percent from a year earlier.
“The Fed's streak of interest rate hikes and a spectrum of severe weather lashing all areas of the country in recent months undoubtedly sidelined office touring activity and leasing decisions for many employers,” said Nick Romito, CEO of VTS. “The sluggish start to the year left us in limbo as to whether we’d see normal levels of spring activity return. Thankfully, the office leasing market had its spring awakening - and then some.”
Locally, all cities tracked by the VODI saw office demand increase in March, with five of the seven cities reporting office demand jumps of more than 30 percent month-over-month. San Francisco saw the largest jump, rising 69 percent from February to March to a VODI level of 49. Office demand in both Boston and Los Angeles jumped 42 percent in March, followed by New York City and Washington, D.C., whose VODI levels rose 35.7 percent and 32.7 percent month-over-month, respectively. Of note, San Francisco and New York City are now at their highest levels since September of 2021.
Chicago and Seattle were the exceptions in March, seeing relatively modest single-digit office demand increases. Seattle’s VODI increased 6.5 percent month-over-month, and Chicago’s VODI just 3.8 percent.
Additionally, there continues to be a clear delineation between demand for office space in East Coast and West Coast cities. From January 2021 to September 2022, despite some fluctuations, the East and West Coast average VODIs maintained approximately similar levels. However, this March marked the sixth consecutive month where the average West Coast VODI has been consistently and substantially lower than that of the East Coast. The gap has ranged from a low of 11.4 percent in January 2023 to a high of 20 percent in November 2022, averaging 16.6 percent over the six-month period.
“Some of what we’re seeing play out in the East Coast vs. West Coast office leasing markets are partially a reflection of the city's job market performance. Layoffs and declines in job postings have hit the tech sector particularly hard, and consequently held office demand back in tech-heavy metro areas like San Francisco and Seattle,” said Ryan Masiello, Chief Strategy Officer of VTS. “At the same time, New York City’s combination of smaller living spaces and comprehensive public transportation is making a return-to-office much more appealing for employees and employers alike. We’re still operating in cloudy economic conditions though, so it will be interesting to see if this coastal gap persists as we continue into the busier spring and summer months.”
VTS Office Demand Index (VODI)
National |
BOS |
CHI |
L.A. |
N.Y.C. |
S.F. |
SEA |
D.C. |
|
Current VODI (March) |
63 |
57 |
54 |
64 |
76 |
49 |
49 |
65 |
Month-over-Month VODI Change (%) |
31.3% |
42.5% |
3.8% |
42.2%` |
35.7% |
69% |
6.5% |
32.6% |
Month-over-Month VODI Change (pts.) |
15 |
17 |
2 |
19 |
20 |
20 |
3 |
16 |
Quarter-over-Quarter VODI Change (%) |
37% |
103.6% |
8% |
36.1% |
40.7% |
58% |
25.6% |
14% |
Quarter-over-Quarter VODI Change (pts.) |
17 |
29 |
4 |
17 |
22 |
18 |
10 |
8 |
Year-over-Year VODI Change (%) |
-4.5% |
3.6% |
-8.4% |
-9.8% |
0% |
32.4% |
2.1% |
-16.7% |
Year-over-Year VODI Change (pts.) |
-3 |
2 |
-5 |
-7 |
0 |
12 |
1 |
-13 |
CHANGES TO THE VODI REPORT
VTS will be shifting the cadence of the VODI report from monthly to quarterly and retiring its standalone Greenshoots Report. This means the March 2023 VODI report, scheduled to publish on Wednesday, April 26, will be the final monthly report. The new quarterly VODI report will be published in July, capturing data and findings from VTS over a three-month (quarterly) period moving forward. The new VODI report will include select data points from the former VTS Greenshoots report, providing all your need-to-know trends and takeaways for the office market in one comprehensive report.
For questions, data inquiries or to connect with a VTS spokesperson, reach out to the identified media contacts noted.
ABOUT VTS
VTS is the commercial real estate industry’s leading technology platform that transforms how strategic decisions are made and executed across the asset lifecycle. In 2013, VTS revolutionized the commercial real estate industry’s leasing operations with what is now VTS Lease. Today, the VTS Platform is the largest first-party data source in the industry and delivers data insights and solutions for everyone in commercial real estate to fuel their investment and asset strategy, leasing and marketing automation, property operations, and tenant experience.
With the VTS Platform, consisting of VTS Lease, VTS Rise, VTS Data, and VTS Market, every business stakeholder in commercial real estate is given the real-time market information and executional capabilities to do their job with unparalleled speed and intelligence. VTS is the global leader with more than 60% of Class A office space in the U.S., and 12 billion square feet of office, retail, and industrial space is managed through our platform globally. VTS’ user base includes over 45,000 CRE professionals and industry-leading customers such as Blackstone, Brookfield Properties, LaSalle Investment Management, Hines, BXP, Oxford Properties, JLL, and CBRE. To learn more about VTS, and to see our open roles, visit www.vts.com.
