After several months of increasing demand for office space across the United States, the emerging recovery has stalled amid a resurgence of COVID-19 and continued economic uncertainty, although demand for leased office space is markedly higher than it was at its lowest point just after the pandemic began. This is according to the new VTS Office Demand Index (VODI), which tracks tenants of office properties entering the market across the nation, and shows demand for office space is still down 56.4 percent from February 2020n pre-pandemic levels.
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VTS announced that the VODI would be made available moving forward on a bi-monthly basis. The VODI is the earliest available indicator of forthcoming office leases and tenant sentiment, locally and nationally1, 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.
Pre-COVID-19, the national VODI was consistently around 100 with some seasonal variation for roughly two years, demonstrating the stability of national office demand pre-crisis.
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In February 2020, just prior to the stay-at-home orders that swept the nation in March 2020, the national VODI index value was 94. Three months later, in May 2020, the VODI had declined by 84 percent to an index value of 15. Coming off the bottom, demand initially increased steadily at a rate of around 7 index points a month from June through September, but in October, slightly reversed course and fell by 1 index point to an index value of 41, a signal that a full recovery will likely take time.
“This is, by far, the worst contraction in recent history for the office market as businesses grapple with a global pandemic,” said VTS CEO and co-founder Nick Romito. “While we started to see some signs of life over the summer, businesses experienced a second wave of uncertainty in October due to resurgence of the virus, the elections and the markets. We expect it’s going to be a bumpy ride for months to come, although we’re confident in a long-term recovery.”
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