Dive Brief:
- Renewals accounted for 58% of the top 100 office leases in 2023, marking a reversal from 2022 when new leases “dominated,” according to recent research from CBRE.
- The 100 largest leases in 2023 totaled 26.8 million square feet, accounting for 15% of total office leasing volume, down from 30.4 million square feet that represented 13.7% of total volume in 2022. The average lease size shrank by 12% year over year to 267,558 square feet, CBRE says.
- The real estate services firm cites cost containment in an uncertain environment as the key motivation behind many occupiers’ decision to renew their leases rather than taking up new space.
Dive Insight:
In the next three to five years, 88% of companies expect their real estate footprint to change, with 52% anticipating footprint reductions and 36% planning to grow their portfolios, according to CBRE’s 2023-2024 Global Workplace & Occupancy Insights report. Even as companies cite plans to mandate in-office attendance, office utilization rates in the Americas stood at just 31% last year, averaging less than half of the pre-pandemic global average of 64%.
As a result, lower average space utilization rates are driving office occupiers to continue rightsizing their portfolios, CBRE says. Its report notes that the top 100 leases reflected broader flight-to-quality trends, with 84% of new leases for space in Class A or A+ buildings. This figure is significantly above the 61% share of overall U.S. office inventory that these higher-quality buildings constitute.
The research highlights that the greatest share of the top 100 leases in 2023 came from the government sector, which replaced the finance and insurance sectors as the largest contributor to the top 100 leases. The report attributes this shift to the expiration of several large government agency leases and reduced leasing activity among private companies. The government sector secured 19 leases totaling 5.8 million square feet of the top 100 leases in 2023 — more than double its activity in 2022, CBRE says.
Finance and insurance, meanwhile, accounted for 13 of the top 100 leases in 2023, compared with 25 in 2022. CBRE attributes that decline to economic headwinds and continued downsizing. Technology companies had 11 leases totaling 3.6 million square feet, down from 17 totaling 5.9 million square feet in 2022, with more than 60% being signed in the Pacific Region, the research says.
The largest share of renewals came from the Mid-Atlantic region, CBRE said. Overall, the Northeast and Pacific regions accounted for most of the top 100 leases by total square footage, with Manhattan, Silicon Valley and New Jersey having a combined share of 41%.
