CompStak’s 2024 Year-End Office Market Report: Part Three

SKIP AHEAD TO

• Average Free Rent for Renewals Rose Sharply in 2024, Narrowing the Gap with New Deals
• Average Work Value for Office Leases Reached New Cyclical Peak at Year-End 2024
• New York City Market Was Home to Majority of Top 5 Most Valuable Deals Across TAMI, Legal Services, FIRE, and Life Science Sectors in Gateway Markets
• Top TAMI and FIRE Deals by Value, Gateway Markets
• Office Subtype Spotlight – Life Science/Lab Space: Average Starting Rents for Life Science Declined for Third Straight Year But Held On To Gains Over 2019 Levels

The office market continues to evolve, shaped by shifting work habits, leasing activity, and economic forces. While office job losses slowed, remote work trends may be stabilizing, and TAMI tenants are showing signs of renewed leasing momentum. Prime Class A rents are nearing a potential peak, and landlords are adapting with record-high tenant incentives to secure long-term commitments. Meanwhile, NYC remained a hotspot for high-value legal leases.

In this blog series, we’ll break down the major insights from CompStak’s 2024 Year-End Report, diving into what these trends mean for the office market in the years ahead.

Want the full insights? Download a copy of the report here.

Average Free Rent for Renewals Rose Sharply in 2024, Narrowing the Gap with New Deals

The average share of lease term given to free rent reached new highs at year-end 2024 for both new deals and renewals/extensions, as above-average concessions continued to favor tenants. However, the pace of growth for renewals/extensions outpaced that of new deals. In 2024, free rent accounted for an average of 8.5% of lease terms in new deals—up 20 basis points year over year and 280 basis points from 2019. For renewals and extensions, the share rose to 7.2%, increasing by 170 basis points year over year and also up 280 basis points from 2019.

Average Work Value for Office Leases Reached New Cyclical Peak at Year-End 2024

Across renewals and new transactions, average work value continued rising in 2024, with renewals and extensions seeing the most significant increases. From 2Q 2024 to 4Q 2024, renewal-related work value growth outpaced that of new deals for three consecutive quarters, even for renewals without expansions.

Lease term length and work value remain positively correlated, as landlords offer higher TI/work value packages for longer lease commitments. However, this linear correlation strengthened post-COVID, with an R-value of 0.92 for transactions from 3Q 2021 to 4Q 2024, compared to 0.68 for 4Q 2017 through 1Q 2021.

New York City Market Was Home to Majority of Top 5 Most Valuable Deals Across TAMI, Legal Services, FIRE, and Life Science Sectors in Gateway Markets

The top five lease transactions by value of Q3 – Q4 2024 that were signed by TAMI tenants were all located in the New York City and San Francisco markets, and except for OpenAI’s signing of a deal worth $238.8 million, were all signed during the fourth quarter. In this category, Bloomberg inked the top deal, leasing 924,797 square feet for a total of $719.3 million.

The three most valuable leases signed by tenants in the legal services sector included Ropes & Gray, Willkie Farr & Gallagher, and Winston & Strawn, all three of which were in New York City Midtown buildings. Ropes & Gray ranked first in the legal services category committing to over 427,000 square feet for a total of $786.8 million. However, two deals in the Washington D.C. market also made the list as Freshfields and ArentFox Schiff both signed new leases at 1100 15th Street Northwest.

Extensions and renewals were the most common transaction type among top deals involving FIRE tenants in Q3 – Q4 2024, with all but one also expanding their footprint. TPG signed the only new lease within the top five and the highest total consideration over the lease at over $1 billion. The second highest value deal signed by a FIRE tenant was The Blackstone Group, who notably inked one of the largest transactions of 2024 at over 1 million square feet for over $635 million.

Life science tenants signed significantly smaller leases than those in the TAMI, legal services, and FIRE sectors. None of the top five life science deals exceeded 60,000 square feet, with two in the Bay Area. Roivant Sciences led with a $105M+ lease at 1 Penn Plaza in NYC.

“>Top TAMI and FIRE Deals by Value, Gateway Markets

Top Legal Services and Life Science Deals by Value, Gateway Markets

Office Subtype Spotlight – Life Science/Lab Space: Average Starting Rents for Life Science Declined for Third Straight Year But Held On To Gains Over 2019 Levels

The pace of increase in average starting rents for life science office space, relative to Q4 2019 levels, declined for three consecutive quarters in 2024. Starting rents peaked in Q4 2021, rising 46.7% above 4Q 2019 levels. By year-end 2024, life science office starting rents averaged $61.68 per square foot, down 19.1% from their 2021 peak of $76.22 per square foot.