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This week marks three years since COVID-19 was declared a public health emergency by the United States Federal Government (January 31, 2020). In addition, the Biden administration announced that they would end the COVID state of emergency in May 2023. While some may feel the pandemic has been in the rear view mirror for some time now, many of the changes that the pandemic influenced are still impacting us today. In particular, the last few years helped usher in or accelerate many dramatic changes in the commercial real estate industry.  In this week’s post CompStak is covering three of these major trends that defined the past three years in CRE. They include:

  • Office sublease space rose dramatically– CompStak analyzes what type of subleases, especially top value ones, have actually been absorbed since April 2020.
  • Industrial markets, especially port markets, experienced double-digit rent growth helped by growing demand from e-commerce sales, supply chain challenges and changing consumer behavior since the beginning of 2020.
  • Pandemic related migration and housing demand pushed multifamily rent growth to new heights, especially in many Sunbelt markets.

The Most Valuable Subleases Completed since April 2020

The office sector was arguably the most impacted CRE sector by the pandemic. Millions of workers nationwide shifted to working predominantly at home, and many still work remotely at least part of the workweek today. While the latest Kastle reading on office occupancy across its 10 major markets tracked reached 50% for the first time since the pandemic began, market participants generally agree most companies will maintain a hybrid model going forward. A major structural shift has been underway in the office sector as a result of reduced demand. And now the sector is being forced to address new setbacks including rising interest rates, layoffs, a turbulent stock market and concerns of an upcoming recession. 

During the last three years, U.S. companies put millions of square feet of sublease space on the market with the goal of shedding space and cutting costs.  At the same time, direct available space has also risen, meaning that for tenants in the market over the last few years, there have been options abound across many price points and building qualities. With three years of elevated sublease availability in the books, CompStak analyzed the top 36 most expensive subleases that have transacted in the 36 months since the onset of the COVID-19 pandemic.  Where did these deals take place and what industries absorbed space from those tenants managing to successfully shed space?

CompStak’s data revealed that most (83.3%) of these top valuable subleases (total rent received over term) were completed in New York City followed by San Francisco and the Bay Area.


TAMI (Technology, Advertising, Media and Information) tenants accounted for the largest share of tenants shedding space in these top deals, followed by the FIRE sector. While 38.9% of the tenants shedding space among these top subleases were TAMI, just over 27.8% of the top ranked subleases by value were absorbed by this sector. As noted in a previous CompSnap, the pullback by the technology sector is a growing challenge for the office sector, and especially for both the San Francisco and New York City office markets. Already an industry that had favored remote work through the pandemic, the latest slowdown may continue to be a drag on demand in both of these markets.


These subleases ranked high in value largely due to longer lease terms— among these top subleases the lease term averaged 118 months. This well outpaces the average lease term for direct and overall subleases completed over the same period in San Francisco, Bay Area and New York City. Meanwhile, the average starting rent among these deals was $65.18, with just one deal totalling over $100 per square foot in starting rent according to CompStak’s data.  In contrast, last week CompStak’s analyzed the 10 most valuable overall office deals in Manhattan for the Real Deal, and found that those deals averaged more than $100 per square in starting rent.


Rising E-Commerce Demand and Supply Chain Issues Ushered Industrial Rent Growth to New Heights

The second major trend is the robust rent growth experienced in many industrial markets across the country. This rent growth made industrial a top-performing property sector of the pandemic increasingly targeted by institutional investors especially as other core sectors like office faltered. The pandemic accelerated many of the changes that helped yield the strong rent growth recorded over the last three years. While e-commerce has been growing for years, the pandemic greatly increased its share as a result initially of COVID-related shutdowns —e-commerce reached a historical peak in 2020, reaching  16.4% of all retail sales in 2020. Secondly, consumer demand also shifted to goods from services, resulting in increased need for shipping and warehousing. Finally, supply chains were strained amid a global surge in demand for goods as well as widespread disruption due to COVID-19. Combined, these three factors led to a nearly indefatigable appetite for industrial space nationwide.



Port markets on the East and West coasts were some of the top recipients of this increased demand which led to double digit annual growth figures for the last two years. The industrial markets surrounding the ports of Long Beach and Los Angeles (traditionally the busiest ports nationwide) in Los Angeles County, Orange County and the Inland Empire displayed the strongest rent growth earliest in the pandemic but recently East Coast markets like Atlanta and New Jersey have been catching up.  Over the course of 2022, port volume began to shift from the West Coast to East as a result of reduced import volume from China and labor challenges on the West Coast. Most recently the Port of New York and New Jersey announced record port volume for 2022 overall, but Los Angeles inched ahead for December volume, indicating that some port volume market share may be shifting back to the West Coast. 

From 2021 to 2022, each of these port markets yielded double digit rent growth ranging from 48.4% in the Inland Empire to 13.3% in Atlanta. From 2019 to 2020, the Inland Empire experienced rent growth averaging about 3.6%, but from 2021 to 2022 rent growth had accelerated to over 48%. In Los Angeles County, where much of the product is servicing “the last mile”, rent growth reached over 40% in this same period. While the capital markets are indicating that investment is slowing in industrial product amid rising interest rates and economic concerns, there is not yet widespread indication of how much rent growth may slow, especially in these prime industrial markets.


Pandemic Related Residential Migration and Increased Housing Demand

During the last three years, the multifamily market experienced some notable highs and lows. A brief, but severe recession from February 2020 to April 2020 (and the shortest in U.S. history) and the most largest drop in nationwide employment since the Great Depression pushed down rental rates in early 2020. (The U.S. lost more than 21 million jobs in just two months from February 2020 to April 2020.)


However, some markets began to see improvement by the end of the year with rents accelerating across 2021 and for much of 2022 due to a drop in unemployment and an improving economy fueling housing demand. In addition, a rise in remote work influenced some migration to new housing markets fueling some new demand in Sunbelt Markets and outside of gateway metropolitan areas. 

Utilizing multifamily data from CompStak’s partner RealPage, we compared the effective rent growth for the top 20 fastest growing metropolitan areas for nonfarm job growth over the last year (November 2021 – November 2022).  The top 20 fastest growing metros for job growth ranged from Texas markets like Dallas-Fort Worth-Arlington, TX (+6.1%) and Houston-The Woodlands-Sugar Land, TX (+5.6%) to Seattle-Tacoma-Bellevue, WA and Louisville/Jefferson County, KY-IN which grew 4.4% and 4.2%, respectively from November 2021 to November 2022, according to the Bureau of Labor Statistics. Within these top 20 fastest growing metros for job growth, we analyzed how multifamily effective rents grew over the same period. Among the findings:

  • Two Florida metros, Miami-Miami Beach-Kendall, FL, and Orlando-Kissimmee-Sanford, FL, inked double digit year over rent growth (and the fastest rent growth among these markets) but these markets ranked in the bottom half of these 20 markets for job growth. 

  • The Dallas-Fort Worth-Arlington, TX metro grew fastest in terms of employment but ranked 4th for effective rent growth among this set.

  • The Las Vegas-Henderson-Paradise, NV metro area’s nonfarm employment expanded by 4.8% (ranked 9th), but over the same period it ranked last in this group for effective rent growth (0.7%).


Early in the pandemic, data indicated that many people were relocating or moving temporarily as a result of the ability to work remotely. The National Association of Realtors recently analyzed the latest U.S. Census Bureau data covering the net domestic migration by state.  According to their analysis of census data, the states gaining the most net residents from 2021 – 2022 included Florida and Texas while New York followed by California lost the most population over this same period. While fewer Americans are moving in general over the last two years according to NAR’s data, an analysis of prime markets in each of these states reflects how differently they performed during the depths of the pandemic. 

In both San Francisco, CA and New York City’s metropolitan areas, effective rents experienced a deeper and more sustained decline as compared to Austin, Texas and Miami’s metro areas during the depths of the pandemic:

  • Beginning in 2Q2020, San Francisco and New York City experienced five consecutive quarters of year over year effective rent declines as compared to four consecutive quarters for Miami and Austin.

  • San Francisco and New York City’s declines were not only longer but more severe—in 1Q2021, their effective rents were down 20.3% and 15.2% year over year, respectively. 

  • Meanwhile, effective rents were down just 0.7% in Miami and 2.0% in Austin in the same period. 

  • While none of these 4 markets experienced negative year over year growth in Q4 2022, the pace of growth is decelerating from prior quarters.

A similar trend is revealed in occupancy data. San Francisco’s metro area experienced the most severe year over year dip in occupancy rate in 4Q 2020, when occupancy was down 3.6% from the prior year. At the same time, New York City’s metro was down by nearly half this amount, falling 1.7% from the prior year. Miami’s occupancy rate was down by 1.5% year over year in 2Q2020 but by the end of the year it was down just 0.4% from the end of 2019. 

In recent months, rental rate trends indicate that growth is slowing across the United States as inflation, affordability concerns and economic worries have increasingly weighed on the consumer.


Interested in more data on CRE trends during COVID and post COVID? Join CompStak today! 

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