Tenants rushing back to tour offices, but things still far from normal
Activity has climbed each month since December; remains below pre-pandemic levels
Office tenants are touring buildings at the highest numbers since the start of the pandemic — an early indicator that companies may be ready to commit to new workspaces and sign leases. But this early activity is still far below where it was pre-Covid.
Across the country, tenants have been increasing their touring activity each month since December, according to the commercial real estate data firm VTS. Tour activity is closely watched as an early indicator of demand to lease new space. The report tracks the office markets of Boston, Chicago, New York, Los Angeles, San Francisco, Seattle and Washington, D.C.
“Though still depressed versus pre-Covid times, the slow recovery of office demand both nationally and in individual markets featured in the [study] correlates incredibly well with leasing activity,” VTS’ Ryan Masiello wrote in an email. “One cannot occur without the other.”
Tours, both in-person and done virtually, were up 235 percent in August from where they were at the same point last year, VTS’ figures show.
Such a large increase shouldn’t be all that surprising: August 2020 was only a few weeks after the state went into the second phase of reopening in June, which finally allowed brokers to take tenants into space in-person.
When compared to pre-pandemic levels, however, touring activity is still far below normal.
Nationwide, tours were about 87 percent of where they were on average through 2018 and 2019, according to VTS. And that number may have been padded a little by one-off spikes in places like Chicago and Seattle.
In August, touring activity in Chicago was up 10 percent above where it was pre-Covid, and Seattle was 4 percent over. But VTS noted those numbers may have been swayed by a few large tenants going on tours, and it wasn’t clear those cities could sustain their activities.
Masiello said there’s usually a gap of about three to six months between the time a tenant first enters the market on a tour and a signed lease. The average tenant in VTS’ figures was looking for around 7,000 square feet of space.
Other cities were far below pre-pandemic levels such as Washington, D.C., where tour activity was 57 percent of what it was before Covid hit; and San Francisco, which was at 63 percent. Boston touring activity was 65 percent of where it was over the two-year period prior to 2020.
New York City and Los Angeles, however, were closer to normal. Tour activity in those cities in August was at 96 and 97 percent, respectively, of its pre-Covid levels.
Masiello said each market has its own story to tell. Chicago and Seattle, he said, had some pent up demand with large tenants going on tours in August. Washington saw a seasonal summer slowdown and lighter demand from government and nonprofit tenants.
Boston, he said, had a very strong run in 2018, which may be a difficult benchmark to return to.
“Focusing on the trendline itself can be helpful when comparing here,” he said, rather than focusing on the comparison to pre-pandemic activity.