Leases  ·  Sales

Tech Pullback, Rising Interest Rates Further Complicate US Office Recovery


Office investors around the country are bracing for a cold winter as headwinds rise and fundamentals drop.

Barring an explosion of office investment sales in December, this year has seen far less trade volume than 2021. Approximately $80.4 billion in office sales closed in the first 11 months of this year, according to the latest report from CommercialEdge. Last year, when capital was cheap and tech companies were expanding, the 12-month total ended around $115 billion.

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The national vacancy rate is 16.2 percent, which is 110 basis points higher than last year, while rents have softened around the country. The average office listing rate in the U.S. was $38.06 per square foot at the end of November, down 3.1 percent year-over-year, but 12 cents higher than October.

The less-than-encouraging number of empty offices comes as tech companies are shrinking payrolls and downsizing their footprints, especially in gateway markets, adding to the hurdles already facing the office sector. Facebook’s parent company Meta has already given up its presence at four office buildings and is set to give up its presence at two more. The same company is spending $3 billion to reduce its office footprint by subleasing space and backing out of lease commitments. For example, in Austin, Meta wants to sublease a 589,000-square-foot space, and in Silicon Valley, it vacated The Village at San Antonio Center.

Other major employers are doing the same. Salesforce will sublease around 40 percent of its 43 floors at Salesforce Tower in San Francisco; Lyft is subleasing about 45 percent of its presence across New York, Seattle, Nashville and San Francisco; and, over the summer, Amazon (AMZN) halted construction of new office buildings in Nashville and Bellevue, Wash.

“We’re paying close attention to [workforce optimization] policy announcements and whether companies follow through with implementation, or if they continue to kick the proverbial can down the road,” CommercialEdge’s Peter Kolaczynski said. 

Of the $80.4 billion in office sales closed this year, Manhattan accounted for $5.88 billion and is the only market to surpass $5 billion. Boston, the Bay Area, Washington, D.C., and Dallas each recorded more than $4 billion in sales. Los Angeles closed $3.28 billion with one month to go, and Miami has $1.31 billion.

There are some “silver linings” — Apple (AAPL) and Twitter advanced their return-to-office this year, and other tech companies have ditched fully remote work. With $3.66 billion in office sales, Atlanta is on track to surpass its 2021 totals.

Manhattan vacancies continue to rise while its office space still commands the nation’s highest asking rent at $75 per square foot. Miami’s average rent is at $49.63, which is 11.6 percent higher than 12 months ago; Washington, D.C.’s is $41.53, 1 percent higher than last year; Los Angeles’ is $42.32, 0.2 percent below last year. Despite its high vacancy rate and the overall tech pullback, San Francisco commands the highest asking rent on the West Coast with $67.03 per square foot, which is second only to Manhattan on a national level.

Gregory Cornfield can be reached at