Elgin Area Chamber Of Commerce: Office Market Turns Corner, Jobless Claims Drop, Services Sector Growth Slows

Press release from the Elgin Area Chamber of Commerce:

February 04, 2022

Office Market Turns Corner

For the first time since 2020, the nation’s office market saw positive net gains in leasing, a sign that companies are confident employees will use their space, according to an industry report.

Commercial real estate firm Transwestern reported that U.S. office leasing during the fourth quarter had 644,000 square feet more space filled by tenants moving in than the amount left vacant by those those moving out. It was also the first quarter there was national average occupancy growth since the beginning of the pandemic.

The Boston, San Jose-Silicon Valley and Dallas-Fort Worth areas were the three biggest contributors to the overall gain of positive space absorption. Boston had 1.64 million square feet in net absorption, followed closely by Silicon Valley’s 1.61 million. The Dallas-Fort Worth area was at 1.21 million.

Office space remains relatively unused, however, because of the lingering pandemic. The largest markets haven’t yet returned to pre-pandemic levels.

Boston, for example, is still just under 40% for office usage, according to data from Falls Church, Virginia-based security firm Kastle Systems, which tracks office use through anonymous employee data collected from workplaces where it provides access-control technology.

“In this environment, concessions have become a larger part of the story when it comes to market dynamics,” Elizabeth Norton, Transwestern’s senior managing director of research services, said in a statement. “In 2021, tenant improvement allowances increased by an average of 15% in our top markets. Also, the number of months in free rent edged up, despite terms remaining level.”

Jobless Claims Drop

New claims for unemployment fell last week, a conflicting indicator of recovery given expected job losses in January.

The Labor Department reported Thursday 238,000 new claims were filed, which fell below Wall Street projections of 245,000, and was lower than the 261,000 the previous week.

Even the not-adjusted figure that considered the raw numbers, dropped last week, falling 11,728 to 257,002.

Meanwhile, the number of those still using unemployment benefits, known as continuing claims, has dropped to a four-week moving average of 1.619 million, the lowest average since Aug. 4, 1973.

The report came a day after payroll company ADP reported private payrolls shrinking by 301,000 in January. Because of that report, the government’s Friday report is expected to show a loss as well.

Services Sector Growth Slows

The pace of growth in the services sector slowed in January but remains strong.

In the latest report from the Institute of Supply Management, the overall index reading fell 2.4 percentage points to 59.9.

Subindices measuring business activity and new orders also dropped. The index for supplier deliveries increased, which means companies in the service sector are getting their supplies more quickly.

Though still high, the prices index fell, a possible indicator the prices could be the start of further easing.

“Services businesses continue to struggle replenishing inventories,” Anthony Nieves, chair of ISM’s services business survey, said in a statement. But fewer firms reported that inventories were too low.

Source: www.CoStar.com

This press release was produced by the Elgin Area Chamber of Commerce. The views expressed here are the author’s own.