CBRE: Office Leases Reflect Preference for Renewals, Smaller Footprints

CBRE, Dallas, said renewals claimed more large office leases last year than in 2019, indicating many companies are postponing relocations and other real estate changes until they get clarity on the economic recovery and pandemic response.

“Office leasing was tentative last year for well-known reasons,” said Whitley Collins, Global President of CBRE Advisory & Transaction Services. “Activity likely will perk up in 2021 along with the continued rollout of COVID-19 vaccines, an improving economy and a gradual return to the office by a growing number of workers.”

Collins said companies will likely map out their long-term office strategies with new emphasis on determining the most efficient use of workspace with more employees working flexibly from multiple locations.

In many ways, the largest U.S. office leases signed last year reflected trends in the broader office market. Renewals accounted for 43 percent of the combined square footage of the 100 large leases, up from 33 percent in 2019. The 100 largest office leases totaled 29 million square feet, a 32 percent drop from a year earlier, mirroring the 36 percent decline in all U.S. office leasing last year. Similarly, the average size of leases in the largest 100 declined to 290,000 square feet in 2020 from 422,000 a year prior.

As in the past several years, the technology industry last year claimed the largest share by square footage (nearly 25 percent) of the largest 100 leases. The tech sector kept its lead even as the industry’s office-leasing activity declined by more than half from 2019. Claiming the second-largest share was the government and nonprofit sector (16 percent), followed by the legal industry in third.

On a market basis, Manhattan and Washington, D.C., were the clear leaders for share of the largest 100 office leases by square footage at 21 percent and 17 percent, respectively. Seattle claimed the third-largest share with 2.2 million square feet in new leases by tech firms.