Office-leasing volume is down across most industries but weak demand and massive space reductions from the technology sector, in particular, is having an outsized impact in many markets.
A recent study by Savills Inc. found tech leasing fell to a new low in the first quarter of 2023, comprising only 7.8% of demand. Tech made up an average of 21.5% of signed transactions measuring more than 20,000 square feet between Q1 2020 and Q4 2021.
In technology economies Atlanta; Austin, Texas; Denver and Los Angeles, no tech office leases were signed that measured more than 20,000 square feet in Q1.Given tech has been the top industry to lease office space until recently, the slowdown in deal volume has significant ripple effects in specific office markets.
"I don’t expect that demand to pick back up" right away, said Devon Munos, senior director and head of research platform initiatives at Savills. "In addition to economics changing, these companies are still thinking through their remote work policies moving forward. We do see a lot of major tech employees asking their employees to come back — if that continues, that might give us more insight into these companies’ office space usage, but a lot of things are up in the air."
Google LLC out of Mountain View, California, set April 4 as its return-to-office date while Seattle-based Amazon.com Inc. (Nasdaq: AMZN) had its first mandated in-person workday in more than three years earlier this month.
Eric Lonergan, executive managing director and co-market leader in Savills' Seattle office, said many tech companies do want to see people working in the office more regularly but a tight labor market has made issuing mandates difficult.