(BUSINESS WIRE) NEW YORK The growth from March was maintained in May when the new demand for office space reached a plateau. According to the VTS Office Demand Index, demand for office space has been between 50 and 65 percent of the pre-pandemic normal rate of demand for the ninth consecutive month (VODI).
The VODI is the only commercial real estate index that specifically tracks new tenant demand and tracks the distinct new tenant tour requirements, both in-person and virtually, of office properties in key U.S. markets. It is also the earliest indicator of upcoming office leasing activity currently available.
According to Nick Romito, CEO of VTS, when an employer leases office space, they often wager that they will need the space for the following five to ten years.
Therefore, many businesses are delaying important lease choices until they have more information about their long-term plans for remote work due to the uncertainty of how remote or hybrid work will turn out in the long run.
We anticipate that, if and when they feel they need more space, they’ll be exploring what the office means to them by strolling rather than rushing into the market.
Nationally, the demand for office space climbed from 65 to 67 VODI points (3.1%), or 21.8 percent, from April to May. However, the VODI is down 14.1% year over year, which is a result of a substantial but transient increase in demand for office space a year ago following the approval of the COVID-19 vaccines for all adults.
Locally speaking, the main office markets did not experience much shift from April to May, with the exception of New York City and Chicago.
Office Demand Index
Current VODI (May) | 67 | 44 | 60 | 63 | 58 | 80 | 63 | 74 |
Month-over-Month VODI Change (%) | 3.1% | 2.3% | 3.4% | 8.6% | -1.7% | 12.7% | -13.7% | -1.3% |
Month-over-Month VODI Change (pts.) | +2 | +1 | +2 | +5 | -1 | +9 | -10 | -1 |
Quarter-over-Quarter VODI Change (%) | 21.8% | 46.7% | 50% | -10% | -3.3% | 31.1% | 12.5% | 4.2% |
Quarter-over-Quarter VODI Change (pts.) | +12 | +14 | +20 | -7 | -2 | +19 | +7 | +3 |
Year-over-Year VODI Change (%) | -14.1% | -31.3% | +1.7% | -8.7% | -38.9% | -3.6% | -18.2% | -15.9% |
Year-over-Year VODI Change | -11 | -20 | +1 | -6 | -37 | -3 | -14 | -14 |
With rare month-to-month exceptions, core office areas with a higher percentage of remote-friendly occupations are further away from their pre-pandemic norms than those with a lower percentage. The difference between the typical remote-friendly and less remote-friendly VODIs as of May was 22.2 percent.