Demand for Office Space Falls Again as COVID-19 Worsens
Demand for office space dropped sharply in most markets during the last three months of 2020 according to the VTS Office Demand Index (VODI) from commercial real estate platform VTS.
The VODI tracks tenant tours, both in-person and virtually, of office properties across the nation, and is the only commercial real estate index to track tenant demand.
This four-quarter drop in demand followed an active period during the third quarter of 2020, with many companies once again touring available office space.
Nationally, office leasing demand was down 61 percent from December 2019. Dynamics over the year paralleled national COVID-19 cases, with a precipitous drop at the beginning of the pandemic, a modest recovery over the summer, and another drop-off at the end of the year.
By September, demand was at a six-month high at a VODI of 43 index points, but dropped 26 percent in the fourth quarter to 32.
By comparison, the national VODI in February 2020 (pre-COVID-19) was 94 and in December 2019 it was 82.
The fourth quarter typically experiences a drop-off in demand due to seasonality. While the fourth quarter of 2020’s decline was not as steep as in previous and more active years, relative to the much lower levels of demand during this crisis, the decline of 26 percent was more severe than typical.
Only two markets, Los Angeles and San Francisco, bucked seasonality, netting positive growth between the months of October and December.
VTS announced that the VODI would be made available moving forward on a monthly basis.
The VODI is the earliest available indicator of forthcoming office leases and tenant sentiment, locally and nationally, and represents up to 99% of new demand for office space in seven major markets, including New York, Washington, D.C., Los Angeles, Chicago, Boston, Seattle and San Francisco.
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