The latest numbers on net absorption provide encouraging news for the U.S office sector. Data for Q3 2021 shows that net absorption, which measures the change in occupied office inventory, is turning positive in an increasing number of metro office markets. In Q2 2021, one-third of office markets saw positive absorption. This share has risen to 56% in 3Q 2021.
Net absorption is also edging into positive territory at a national level. U.S. net absorption in Q3 2021 was 3.2 million square feet, making it the first time that the national office market has posted positive absorption since Q1 2020.
The COVID-driven downturn in U.S. office fundamentals resulted in a cumulative 153.1 million square feet of negative absorption over the prior five quarters, including a record low of negative 46.1 million square feet in Q1 2021.
Three metro office markets posted over one million square feet of positive absorption in Q3 2021: Atlanta, South Florida and New York. Atlanta leads at two million square feet, over three-quarters of which occurred in the Midtown submarket as firms took occupancy of newly completed projects. South Florida posted almost two million square feet of positive absorption in the third quarter, led by Miami at 859,440 square feet.
Third quarter net absorption in the New York Metro totaled 1.3 million square feet. This includes 870,435 square feet of positive absorption in Manhattan. Two years have elapsed since Manhattan last saw positive absorption.
Other leading office markets with positive absorption in Q3 2021 include Boston, Dallas and Seattle. Second-tier markets with healthy positive absorption in Q3 2021 include Austin (846,910 square feet), Nashville (590,690 square feet), Salt Lake City (385,745 square feet) and Las Vegas (289,320 square feet).
On the downside, Chicago and Los Angeles remain two of the more challenged major office markets, both posting over one million square feet of negative absorption in the third quarter. Detroit and Philadelphia also saw significant occupancy losses of around 680,000 square feet in each market.