2019 was another solid year for office leasing in the U.S., according to Cushman & Wakefield’s latest report. The tech-heavy West region, including Denver, recorded the largest volume of leasing.
Key Takeaways
- Leasing activity was strong and stable in 2019, at roughly the same volume as in 2018.
- The West region exhibited the strongest leasing activity, with more than 100 million square feet (msf) leased for a fourth consecutive year.
- The tech industry once again dominated leasing activity, accounting for 27.6% of the major leases — up from 26.1% in 2018. Tech leasing totaled slightly less than leasing for the financial services, government and real estate combined.
- For a second consecutive year there were more than 25 large leases (over 400,000 sf) signed in 2019.
- It was also a strong year for big-tech leasing. Nearly one quarter (23.9%) of the square footage of tech leases signed last year was by the so-called “FAANG” companies (Facebook, Amazon, Apple, Netflix and Google). That percentage is up from 20% in 2018.
Regional Performance Led by the West
New leases totaled 107.6 msf in the West last year, accounting for 33.2 percent of total leasing activity. That’s well above the West region’s 26 percent of total inventory. Markets such as Phoenix, Los Angeles, Silicon Valley, San Francisco, San Mateo and Denver all contributed more to total national leasing volume than they represent in nationwide inventory.
Conclusions
2019 closed with new leasing topping 300 msf for a third consecutive year. Key drivers for leasing in 2019 most likely to influence leasing in the near future are:
- Continuing growth in the tech sector. With technology companies continuing to grow, so does their appetite for office space. As we reported in The Great Tech Migration, tech companies are leasing space throughout the nation to tap into the tech talent pool in a variety of markets.
- Job growth. One of the most important drivers of leasing is employment. When the economy is adding jobs in industries such as financial services, professional services and media there is more demand for office space. The economy added 540,000 of these office-using jobs in 2019 and is likely to continue to create additional positions in early 2020.
- Occupiers follow the talent. Cities with the strongest leasing, relative to their size, tend to be those that have a highly-educated talent pool that is attractive to occupiers. “Talent” will remain a driver in 2020 and beyond.
