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METHODOLOGY
VTS Office
Demand Index
(VODI)
Quarterly Report
Is demand finally thawing?
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in the market today.
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San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw. In Chicago and Seattle, the upward curvature of the VODI’s path is clearly visible.
The VODI’s volatility makes it difficult to discern a change in Boston and San Francisco. To get a better sense, the charts below show each city’s VODI and their changes compared to 12 months earlier, as they emerge each month. To help view the progression of change, we fitted a trend line to the year-over-year changes for the period since late 2022 – when the Post-Vaccine Wave of new demand for office space subsided.
Here is the chart for Boston. The trend line has clearly crossed from negative growth territory to positive, suggesting that Boston’s VODI is thawing.
Moving beyond Washington, D.C.:
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
Read more local VODI trends
LOCAL
BOSTON
Read VODI impacts on local markets
All VODI markets but one experienced positive growth compared to a year ago:
Read VODI impacts on local markets
LOCAL
At 74, the Los Angeles VODI was 32.1 percent above its level of 56 three months ago, and up 19.4 percent year-over-year. With the exception of a short-lived spike in May 2022, the current reading is Los Angeles’ highest since the Post-Vaccine Wave in the Summer of 2021, when the city’s VODI briefly surpassed 100.
At 74, the Los Angeles VODI is also the highest VODI among all cities reported. The city’s VODI growth owes primarily to a spike in tenants seeking large spaces, greater than 50,000 square feet. New demand for spaces of that size in Los Angeles is now higher than at any time since June 2021. While the WGA strikes may have hurt demand in Los Angeles as of recent, the tech sector made up for that recently.
In contrast, at 21, the Seattle VODI was 43.2 percent below its level of 37 in June, and down 52.3 percent year-over-year.
Flowing at only about one-fifth of its pre-pandemic pace in 2018-2019, Seattle’s VODI is the lowest among all VODI cities. Although Seattle saw considerable new demand in the medium-sized, 10,000-50,000 square foot category, it has seen no new requirements at all for large spaces in the 50,000+ square foot category since June. While the Seattle market occasionally sees a month without new demand in the 50,000+ square foot category, the 3-month absence of such demand from July to September is the only such gap since the early pandemic lockdown period.
SEE MORE LOCAL TRENDS
This refers to the average of the VODI cities’ month-over-month changes using absolute values, so that negative and positive fluctuations don’t cancel each other out.
1
NEW YORK CITY
NEW YORK CITY
SAN FRANCISCO
SAN FRANCISCO
In March, the Los Angeles VODI hit 85. The last time it was this high was during the Post-Vaccine Wave of new demand for office space in Summer 2021 (92 in August 2021). After that wave, Los Angeles saw a gradual decline in its VODI performance, reaching its low of 45 in February 2023.
VODI
NEW YORK CITY
95.5%
increase from August 2022
to March 2024
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Pre-Pandemic
The Reset
The Crash
The Thawing
The Trough
New Demand for Office Space Over the Pandemic: An Illustration
From January 2018 to March 2020, new office demand fluctuated around a level of 100. In some cities, there was a noticeable downward trend in advance of the pandemic: Chicago, Los Angeles, Seattle; in the other cities the VODI was more ambiguous as to whether it was flat or slightly upward trending.
Pre-Pandemic
In Spring 2020 new office demand fell sharply to the “pandemic low.” Nationally, the VODI fell from 102 in March 2020 to 16 in June 2020, a decline of 84 percent. In some cities the sharp fall was followed by a quick v-shaped rise (New York City and Los Angeles); In others, there was a prolonged u-shaped trough (Washington, D.C., San Francisco, Boston, Chicago, and Seattle).
The Crash
From June 2020 through the end of that year, new office demand generally remained very low. In some cities, such as Boston, Chicago and Washington, D.C., the VODI remained more or less flat during this period. In others, such as San Francisco and Seattle, and most notably in New York City and Chicago, this period saw new office demand begin to recover, foreshadowing the phase that was to follow.
The Trough
After vaccines were introduced in early 2021 a sense of return-to-normalcy pervaded. Nationally, the VODI rose from 33 in January 2021 to 85 in June 2021, as demand that had been waiting on the sidelines during The Trough entered the market all at once in a short period. Once that pent-up demand was spent, the VODI quickly subsided from 87 in August 2021 to 61 in October 2021. Although cities whose economies are more remote work-friendly exhibited substantially lower levels of new office demand, all cities experienced a reset.
The Reset
Since October 2021 the VODI has been seemingly stagnant. It trended downward slightly in the earlier part of the period, and bottomed out in late-2022 and early-2023. Since then, it has slow v beaun aainina new momentum.
The Thawing
Explore nationwide trends
The national VODI receded by 8.1 percent from a quarter ago, in-line with seasonal norms. However, it increased by 11.8 percent from a year earlier, and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
NATIONAL
The decline is in line with normal seasonal trends. During 2018, 2019, 2022, and 2023 (glossing over abnormal pandemic years), the VODI declined by 13.8 percent on average from June to September.
In September, the national VODI was 57. That level reflects a modest decline from one quarter ago. Quarter-over-quarter, the VODI declined by 8.1 percent from a level of 62 in June. The VODI tends to be a fairly volatile series, and we consider movements of less than ten percentage points to be modest.
SEE LOCAL TRENDS
As VODI reports have noted time and again, office-using industries differ from one another in terms of their willingness to accommodate remote and hybrid work. The FIRE sector, for example, presents as more traditional, putting greater emphasis on working from the office, whereas the TAMI sector – and especially the tech sector – has leaned in favor of remote work.
But that may be changing. As recently as the second half of 2023, tech-heavy cities experienced weaker VODI performance, but that pattern has flipped in recent months.
On the left, the following chart plots the change in city-specific VODIs over the last six months of 2023 against a measure of how tech-centric their office space has been. It shows that tech-heavy cities had weaker VODI performance than others in the second half of 2023.
But on the right is a chart for the six months ending in September 2024 shows that in the last six months, the VODI performance of tech-heavy cities was significantly stronger.
View impact on VODI
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
NATIONAL
SEE LOCAL TRENDS
Since the beginning of 2021, general employment has grown robustly and continuously, but it is slowly losing steam. The pace of growth was extremely high at first, with typical net employment gains of 500,000 to 1 million jobs per month in 2021 as the economy rebounded from the pandemic. Since then, that growth has slowed substantially, with “only” 100,000-300,000 net new jobs per month. Unemployment reached just 3.4 percent in early 2023, the lowest level since the 1960s, but by June 2024, it had risen to 4.1 percent.
In contrast, the office-using sector in the VODI markets has performed more poorly. As of May (the latest available at the time of writing), office-using employment in those markets had actually declined by 3.9 percent since peaking in August 2022.
However, at least for the time being, the office-using sector’s job loss seems to have stopped. While office-using job growth was negative from late 2022 to early 2024, that decline has stopped, and growth has remained almost perfectly flat since then.
Read more national VODI trends
Although the general job market remains healthier than the office-using sector in the VODI markets, the former continued to slowly lose steam in Q2, while the latter may have finally turned a corner
NATIONAL
88
Seattle has also seen its VODI trend downwards in recent years, since the
Post-Vaccine Wave of new office demand. However, it has strengthened in recent months, rising 38.2 percent on a quarterly basis and more than doubling from its low point of 20 in August 2023. Having said that, we want to see this trend continue for several more months before labeling it as a resurgence, as we did in Los Angeles and New York City.
Chicago’s VODI has also been declining since the Post-Vaccine Wave and has remained relatively flat since mid-2022. It is not yet clear in which direction it will head.
Finally, San Francisco and Boston both experienced minimal versions of the Post-Vaccine Wave, and despite some volatility, they have essentially remained flat at levels near or below 50 since then.
Seattle has also seen its VODI trend downwards in recent years, since the Post-Vaccine Wave of new office demand. However, it has strengthened in recent months, rising 38.2 percent on a quarterly basis and more than doubling from its low point of 20 in August 2023. Having said that, we want to see this trend continue for several more months before labeling it as a resurgence, as we did in Los Angeles and New York City.
Chicago’s VODI has also been declining since the Post-Vaccine Wave and has remained relatively flat since mid-2022. It is not yet clear in which direction it will head.
Finally, San Francisco and Boston both experienced minimal versions of the Post-Vaccine Wave, and despite some volatility, they have essentially remained flat at levels near or below 50 since then.
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KEY TAKEAWAYS
NATIONAL TRENDS
LOCAL TRENDS
METHODOLOGY
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What does this mean for office demand?
Stronger employment in the office-using sector is likely to fuel greater demand for office space (yes, even with hybrid schedules). Moreover, recent months have seen work-from-home rates decline (see next chart), which means that growth in office-using employment can yield a greater need for office space than it would otherwise.
However, any strengthening of the office-using job market tends to support employees’ bargaining power, which often means more work-from-home, blunting the positive effect on office demand.
The thawing of the office market is not taking place evenly across all markets. To obtain insight into specific markets, we applied the same metaphoric magnifying glass that we used for the national VODI, but city-by-city. The charts below show each city’s VODI along with their changes compared to 12 months earlier, as they emerge each month. To help view the progression of those changes, we fitted a trend line to them for the period from late 2022–when the spike of new demand for office space subsided at the end of The Reset
Los Angeles
Given the robust growth of new demand for office space in Los Angeles, it should come as no surprise to see a steep positive trend line there.
NEW YORK CITY
Despite some pullback in Q2 of 2024, New York City shows a steady increase in the 12-month VODI change trend line.
Despite some pullback in Q2 of 2024, New York City shows a steady increase in the 12-month VODI change trend line.
BOSTON
While the growth of the Los Angeles VODI and even the New York City VODI is fairly clear, Boston’s VODI is harder to assess. However, the trend line fitted to its 12-month changes helps see that Boston’s VODI is thawing, too. The crossing of the trend line from negative to positive means that the Boston VODI is slowly shifting from decline to growth.
CHICAGO AND SEATTLE
Applying the same exercise to Chicago and Seattle’s VODIs reveals a similar pattern to Boston’s though it is less progressed and still lurking beneath the surface, so to speak. Those cities’ fitted trend lines are just now crossing from negative to positive territory.
San Francisco and Washington, D.C.
Unlike the other VODI cities, new demand for office space in San Francisco and Washington, D.C. does not appear to be thawing (at least not yet). Despite some fluctuations, the fitted trend lines in both cities are essentially flat.
The heavy presence of the TAMI sector in San Francisco, with its stronger embrace of remote and hybrid work, can help explain that city’s VODI performance. Washington, D.C., does not have a similar TAMI presence to San Francisco’s, but both cities stand out for having two of the nation’s most educated workforces, and perhaps that resemblance holds some clues.
In San Francisco, even though demand by square footage has been largely flat, the count of new tenants has shown positive growth, as demand has been driven by smaller tenants. While small tenant requirements don’t add up to as much square footage as larger requirements would, an increasing count of new tenants carries a positive signal as to where the demand for office space might be headed.
National
Local
KEY TAKEAWAYS FROM THIS REPORT
The national VODI receded by 8.1 percent from a quarter ago, in line with seasonal norms. However, it increased by 11.8 percent from a year earlier and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
NEXT
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
NEXT
Although the general job market remains healthier than the office-using sector in the VODI markets, the former continued to slowly lose steam in Q2, while the latter may have finally turned a corner.
16.6%
All VODI markets but one experienced positive growth compared to a year ago:
NEXT
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
NEXT
VTS Office
Demand Index
(VODI)
QUARTERLY REPORT
October 2024
The national VODI receded by 8.1 percent from a quarter ago, in-line with seasonal norms. However, it increased by 11.8 percent from a year earlier, and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
Explore nationwide trends
NATIONAL
The decline is in line with normal seasonal trends. During 2018, 2019, 2022, and 2023 (glossing over abnormal pandemic years), the VODI declined by 13.8 percent on average from June to September.
In September, the national VODI was 57. That level reflects a modest decline from one quarter ago. Quarter-over-quarter, the VODI declined by 8.1 percent from a level of 62 in June. The VODI tends to be a fairly volatile series, and we consider movements of less than ten percentage points to be modest.
SEE MORE NATIONAL TRENDS
As VODI reports have noted time and again, office-using industries differ from one another in terms of their willingness to accommodate remote and hybrid work. The FIRE sector, for example, presents as more traditional, putting greater emphasis on working from the office, whereas the TAMI sector – and especially the tech sector – has leaned in favor of remote work.
But that may be changing. As recently as the second half of 2023, tech-heavy cities experienced weaker VODI performance, but that pattern has flipped in recent months.
On the top, the following chart plots the change in city-specific VODIs over the last six months of 2023 against a measure of how tech-centric their office space has been. It shows that tech-heavy cities had weaker VODI performance than others in the second half of 2023.
But on the bottom is a chart for the six months ending in September 2024 shows that in the last six months, the VODI performance of tech-heavy cities was significantly stronger.
View impact on VODI
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
NATIONAL
Since the beginning of 2021, general employment has grown robustly and continuously, but it is slowly losing steam. The pace of growth was extremely high at first, with typical net employment gains of 500,000 to 1 million jobs per month in 2021 as the economy rebounded from the pandemic. Since then, that growth has slowed substantially, with “only” 100,000-300,000 net new jobs per month. Unemployment reached just 3.4 percent in early 2023, the lowest level since the 1960s, but by June 2024, it had risen to 4.1 percent.
In contrast, the office-using sector in the VODI markets has performed more poorly. As of May (the latest available at the time of writing), office-using employment in those markets had actually declined by 3.9 percent since peaking in August 2022.
However, at least for the time being, the office-using sector’s job loss seems to have stopped. While office-using job growth was negative from late 2022 to early 2024, that decline has stopped, and growth has remained almost perfectly flat since then.
Economic and social impacts on VODI
Read more national VODI trends
Although the general job market remains healthier than the office-using sector in the VODI markets, the former continued to slowly lose steam in Q2, while the latter may have finally turned a corner
NATIONAL
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Pre-Pandemic
Read more
The Crash
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The Trough
Read more
The Reset
Read more
The Thawing
Could we be at
inflection point?
Jan '18
Mar '20
Jun '20
Oct '21
Jan '21
Jun '24
New Demand for Office Space
Over the Pandemic: An Illustration
From January 2018 to March 2020, new office demand fluctuated around a level of 100. In some cities, there was a noticeable downward trend in advance of the pandemic: Chicago, Los Angeles, Seattle; in the other cities the VODI was more ambiguous as to whether it was flat or slightly upward trending.
Pre-Pandemic
In Spring 2020 new office demand fell sharply to the “pandemic low.” Nationally, the VODI fell from 102 in March 2020 to 16 in June 2020, a decline of 84 percent. In some cities the sharp fall was followed by a quick v-shaped rise (New York City and Los Angeles); In others, there was a prolonged u-shaped trough (Washington, D.C., San Francisco, Boston, Chicago, and Seattle).
The Crash
From June 2020 through the end of that year, new office demand generally remained very low. In some cities, such as Boston, Chicago, and Washington, D.C., the VODI remained more or less flat during this period. In others, such as San Francisco and Seattle, and most notably in New York City and Chicago, this period saw new office demand begin to recover, foreshadowing the phase that was to follow.
The Trough
After vaccines were introduced in early 2021 a sense of return-to-normalcy pervaded. Nationally, the VODI rose from 33 in January 2021 to 85 in June 2021, as demand that had been waiting on the sidelines during The Trough entered the market all at once in a short period. Once that pent-up demand was spent, the VODI quickly subsided from 87 in August 2021 to 61 in October 2021. Although cities whose economies are more remote work-friendly exhibited substantially lower levels of new office demand, all cities experienced a reset.
The Reset
Since October 2021 the VODI has been seemingly stagnant. It trended downward slightly in the earlier part of the period, and bottomed out in late-2022 and early-2023. Since then, it has slowly begun gaining new momentum.
The Thawing
While the curvature is visible to the naked eye, the fitted trend line showing the average 12-month change in the VODI as it emerges each month is akin to an aided observation of the VODI — a metaphorical magnifying glass or lens, if you will. The trend line’s shift from negative to positive territory is a (lagging) indication of the VODI’s shift from decline to ascent, and its positive slope indicates a build-up of positive momentum.
Remote and hybrid work are likely at the heart of the story; they were the driving force that produced the grand swings of new office demand during the pandemic years. Remote and hybrid work have now settled on a new normal that now anchors the office market.
More than four years after the onset of the pandemic, it is clear that we are in a new normal where working from home – whether fully remote or hybrid – is a permanent facet of the work environment. Even though working from home is on the retreat, it remains far more common than it was before the pandemic, and that seems unlikely to change.
The grand swings of new demand reached their conclusion after late 2022, and the period of stability that has followed since is the new baseline from which new office demand can once again grow. We are seeing that growth emerge.
Note: Location quotients measure the under- or over-representation of an industry in a city. Here, we used the square footage of the tech sector’s new office requirements over the prior 24 months, and determine tech location quotients as the ratio of the tech sector’s share of a city’s total new requirements and its share of all VODI markets’ total new requirements.
Read VODI impacts on local markets
Read VODI impacts on local markets
All VODI markets but one experienced positive growth compared to a year ago:
LOCAL
The thawing of the office market is not taking place evenly across all markets. To obtain insight into specific markets, we applied the same metaphoric magnifying glass that we used for the national VODI, but city-by-city. The charts below show each city’s VODI along with their changes compared to 12 months earlier, as they emerge each month. To help view the progression of those changes, we fitted a trend line to them for the period from late 2022–when the spike of new demand for office space subsided at the end of The Reset.
Read more local VODI trends
Read more local VODI trends
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
LOCAL
Get a pulse on what’s happening in the market today.
See VODI Methodology
Learn more about VTS Data
Los Angeles
NEW YORK CITY
Despite some pullback in Q2 of 2024, New York City shows a steady increase in the 12-month VODI change trend line.
BOSTON
While the growth of the Los Angeles VODI and even the New York City VODI is fairly clear, Boston’s VODI is harder to assess. However, the trend line fitted to its 12-month changes helps see that Boston’s VODI is thawing, too. The crossing of the trend line from negative to positive means that the Boston VODI is slowly shifting from decline to growth.
CHICAGO AND SEATTLE
Applying the same exercise to Chicago and Seattle’s VODIs reveals a similar pattern to Boston’s though it is less progressed and still lurking beneath the surface, so to speak. Those cities’ fitted trend lines are just now crossing from negative to positive territory.
San Francisco and Washington, D.C.
Unlike the other VODI cities, new demand for office space in San Francisco and Washington, D.C. does not appear to be thawing (at least not yet). Despite some fluctuations, the fitted trend lines in both cities are essentially flat.
The heavy presence of the TAMI sector in San Francisco, with its stronger embrace of remote and hybrid work, can help explain that city’s VODI performance. Washington, D.C., does not have a similar TAMI presence to San Francisco’s, but both cities stand out for having two of the nation’s most educated workforces, and perhaps that resemblance holds some clues.
In San Francisco, even though demand by square footage has been largely flat, the count of new tenants has shown positive growth, as demand has been driven by smaller tenants. While small tenant requirements don’t add up to as much square footage as larger requirements would, an increasing count of new tenants carries a positive signal as to where the demand for office space might be headed.
Copyright View the Space, Inc. 2023
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METHODOLOGY
Jan '23
National
Local
KEY TAKEAWAYS FROM THIS REPORT
All VODI markets but one experienced positive growth compared to a year ago:
NEXT
At the other end of the spectrum, new demand for office space in Washington, D.C., was down 32.3 percent year-over-year, though it held steady on a quarterly basis.
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
NEXT
The national VODI receded by 8.1 percent from a quarter ago, in line with seasonal norms. However, it increased by 11.8 percent from a year earlier and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw. New demand for office space remains the highest in Los Angeles and New York City, though after gaining significant momentum over the last two years, both cities have seen their VODI recede recently. The office market in Washington, D.C., the only city whose VODI declined year-over-year, may be paralyzed in anticipation of the presidential election.
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However, compared to a year ago, the national VODI rose by 11.8 percent from a level of 51 in September 2023. We believe that new demand for office space is likely to continue its gradual growth trend for several reasons.
First, the backdrop for this quarter’s VODI is a job market that is gradually cooling but remains healthy, a Goldilocks state that can support new office demand by shifting bargaining power from employees to employers. The latter shows a greater preference for employees to work in-person at the office, corresponding to a stronger demand for office space.
More on the labor market backdrop:
BLS job growth numbers from the past three months paint an overall picture in which job creation rebounded sharply after the pandemic and has gradually slowed to a healthy long-term pace.
Unemployment surpassed four percent in May and has remained slightly above it since. While that remains a historically low unemployment rate, it is higher than the rates that prevailed throughout 2022 and 2023.
The Federal Reserve’s recent rate reduction – the first since March 2020 – is geared at maintaining a healthy labor market and stemming the current cooling. It therefore seems likely that it will prolong the current Goldilocks conditions of a healthy but not overheated labor market that is conducive to office demand.
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Secondly, work-from-home rates in recent months have been the lowest since the onset of the pandemic. Across all sectors of the economy (including non-office-based work), less than one-third of work days are now spent working from home. While work-from-home rates may still recede a step further, they do not seem poised to increase.
Even the tech sector, which is the most reluctant to return to the office, is showing signs of shifting that attitude (as we show next).
Finally, as time passes, employers sitting on the sidelines of the office market will increasingly need to make decisions. Some will be prompted by expiring leases. Others, paralyzed into inaction by uncertainty around remote work, will find that even without clarity, temporary patterns settle and become the new norm.
This evidence is circumstantial, in the sense that it does not necessarily tie the city-specific VODIs’ performance to the tech sector’s attitudes towards remote work. However, it is suggestive, and it lines up with anecdotal evidence of at least some tech sector firms shifting their stance in ways that fuel demand for office space. Amazon, for example, recently announced that it will require corporate staff to work in the office on a daily basis starting next year, OpenAI has secured large new office spaces in both San Francisco and New York City, and NVIDIA is looking to quintuple their space in Austin, demonstrating a commitment to office space.
These companies are leaders, and others may follow. Tech will continue to be an industry to watch closely in 2025 and beyond to see if these trends materialize. The pace of change is likely to be slow, as it is closely tied to gradual staff turnover.
In addition, a shift in the tech sector’s stance may have begun affecting some results we’ve grown accustomed to seeing in the last couple of years. We’ve noted in the past the persistent gap between the average VODI of the more- and less-remote-friendly cities (San Francisco, Seattle, Boston, and Washington, D.C. in the former; New York City, Los Angeles, and Chicago in the latter). The group of more-remote-friendly cities has consistently had a lower average VODI than the other group, and we have attributed that to a greater prevalence of sectors like tech that have tended to embrace remote work. After expanding for more than three years, that gap appears to be shrinking since early 2024.
Similarly, the West Coast markets’ average VODI, which held roughly equal to the East Coast’s throughout 2021, 2022, and 2023, has begun to open a gap since early 2024. While Los Angeles’ VODI surge this year has helped drive that new wedge, so has the tech sector’s apparent re-engagement with the office.
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw.
New demand for office space remains the highest in Los Angeles and New York City, though after gaining significant momentum over the last two years, both cities have seen their VODI recede recently.
The office market in Washington, D.C., the only city whose VODI declined year-over-year, may be paralyzed in anticipation of the presidential election.
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With one exception, new demand for office space increased year-over-year in all VODI markets:
Seattle stands out as having the highest year-over-year growth, in excess of 100 percent. That sharp growth reflects an especially low baseline, as the Seattle VODI dipped sharply in August and September of 2023. If we sidestep that dip and consider the Seattle VODI’s growth starting in July 2023, before the dip, it was still an impressive 45.2 percent.
Boston, San Francisco, and Chicago also exhibited substantial VODI growth from last year, in excess of 10 percent each.
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago.
Washington, D.C., stands out as the only tracked market whose VODI declined, falling more than 20 percent year-over-year.
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And here is the chart for San Francisco, whose trend line is also inching into positive territory.
SAN FRANCISCO
VODI
88
In the case of Chicago, and especially Seattle, this type of chart makes the shift even more evident.
CHICAGO
VODI
88
SEATTLE
VODI
88
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago. New York City’s VODI increased almost 100 percent from 44 in August 2022 to 86 in March 2024. It has since declined to 61, though it remains higher than all other VODI markets except Los Angeles.
New York City and its massive densely populated area is the exception in America’s urban landscape. As such, it led the charge in transitioning back from the pandemic into renewed in-person office attendance. It continues to lead the way as its thawed office market takes a breather.
Like New York City, Los Angeles’ VODI increased sharply, from 45 in February 2023 to 101 in April 2024. Although it has declined to 80 since then, new demand for office space in Los Angeles continues to lead the pack with the highest level among VODI markets.
Finally, Washington, D.C. is the only city whose VODI declined year-over-year, falling 20.5 percent from 44 in September 2023 to 35 in September of this year.
While not all office demand in Washington, D.C. is driven by the federal government, it is certainly the prime mover. Given the proximity of the upcoming presidential election in November, it is likely that decisions around office space are being held up by prospective tenants waiting to see what the future holds. Put differently, the city’s office market may be paralyzed in anticipation of the presidential election.
October 2024
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw. New demand for office space remains the highest in Los Angeles and New York City, though after gaining significant momentum over the last two years, both cities have seen their VODI recede recently. The office market in Washington, D.C., the only city whose VODI declined year-over-year, may be paralyzed in anticipation of the presidential election.
• • •
However, compared to a year ago, the national VODI rose by 11.8 percent from a level of 51 in September 2023. We believe that new demand for office space is likely to continue its gradual growth trend for several reasons.
First, the backdrop for this quarter’s VODI is a job market that is gradually cooling but remains healthy, a Goldilocks state that can support new office demand by shifting bargaining power from employees to employers. The latter shows a greater preference for employees to work in-person at the office, corresponding to a stronger demand for office space.
More on the labor market backdrop:
BLS job growth numbers from the past three months paint an overall picture in which job creation rebounded sharply after the pandemic and has gradually slowed to a healthy long-term pace.
Unemployment surpassed four percent in May and has remained slightly above it since. While that remains a historically low unemployment rate, it is higher than the rates that prevailed throughout 2022 and 2023.
The Federal Reserve’s recent rate reduction – the first since March 2020 – is geared at maintaining a healthy labor market and stemming the current cooling. It therefore seems likely that it will prolong the current Goldilocks conditions of a healthy but not overheated labor market that is conducive to office demand.
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Secondly, work-from-home rates in recent months have been the lowest since the onset of the pandemic. Across all sectors of the economy (including non-office-based work), less than one-third of work days are now spent working from home. While work-from-home rates may still recede a step further, they do not seem poised to increase.
Even the tech sector, which is the most reluctant to return to the office, is showing signs of shifting that attitude (as we show next).
Finally, as time passes, employers sitting on the sidelines of the office market will increasingly need to make decisions. Some will be prompted by expiring leases. Others, paralyzed into inaction by uncertainty around remote work, will find that even without clarity, temporary patterns settle and become the new norm.
This evidence is circumstantial, in the sense that it does not necessarily tie the city-specific VODIs’ performance to the tech sector’s attitudes towards remote work. However, it is suggestive, and it lines up with anecdotal evidence of at least some tech sector firms shifting their stance in ways that fuel demand for office space. Amazon, for example, recently announced that it will require corporate staff to work in the office on a daily basis starting next year, OpenAI has secured large new office spaces in both San Francisco and New York City, and NVIDIA is looking to quintuple their space in Austin, demonstrating a commitment to office space.
These companies are leaders, and others may follow. Tech will continue to be an industry to watch closely in 2025 and beyond to see if these trends materialize. The pace of change is likely to be slow, as it is closely tied to gradual staff turnover.
In addition, a shift in the tech sector’s stance may have begun affecting some results we’ve grown accustomed to seeing in the last couple of years. We’ve noted in the past the persistent gap between the average VODI of the more- and less-remote-friendly cities (San Francisco, Seattle, Boston, and Washington, D.C. in the former; New York City, Los Angeles, and Chicago in the latter). The group of more-remote-friendly cities has consistently had a lower average VODI than the other group, and we have attributed that to a greater prevalence of sectors like tech that have tended to embrace remote work. After expanding for more than three years, that gap appears to be shrinking since early 2024.
Similarly, the West Coast markets’ average VODI, which held roughly equal to the East Coast’s throughout 2021, 2022, and 2023, has begun to open a gap since early 2024. While Los Angeles’ VODI surge this year has helped drive that new wedge, so has the tech sector’s apparent re-engagement with the office.
These companies are leaders, and others may follow. Tech will continue to be an industry to watch closely in 2025 and beyond to see if these trends materialize. The pace of change is likely to be slow, as it is closely tied to gradual staff turnover.
In addition, a shift in the tech sector’s stance may have begun affecting some results we’ve grown accustomed to seeing in the last couple of years. We’ve noted in the past the persistent gap between the average VODI of the more- and less-remote-friendly cities (San Francisco, Seattle, Boston, and Washington, D.C. in the former; New York City, Los Angeles, and Chicago in the latter). The group of more-remote-friendly cities has consistently had a lower average VODI than the other group, and we have attributed that to a greater prevalence of sectors like tech that have tended to embrace remote work. After expanding for more than three years, that gap appears to be shrinking since early 2024.
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw.
New demand for office space remains the highest in Los Angeles and New York City, though after gaining significant momentum over the last two years, both cities have seen their VODI recede recently.
The office market in Washington, D.C., the only city whose VODI declined year-over-year, may be paralyzed in anticipation of the presidential election.
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With one exception, new demand for office space increased year-over-year in all VODI markets:
Seattle stands out as having the highest year-over-year growth, in excess of 100 percent. That sharp growth reflects an especially low baseline, as the Seattle VODI dipped sharply in August and September of 2023. If we sidestep that dip and consider the Seattle VODI’s growth starting in July 2023, before the dip, it was still an impressive 45.2 percent.
Boston, San Francisco, and Chicago also exhibited substantial VODI growth from last year, in excess of 10 percent each.
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago.
Washington, D.C., stands out as the only tracked market whose VODI declined, falling more than 20 percent year-over-year.
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San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw. In Chicago and Seattle, the upward curvature of the VODI’s path is clearly visible.
The VODI’s volatility makes it difficult to discern a change in Boston and San Francisco. To get a better sense, the charts below show each city’s VODI and their changes compared to 12 months earlier, as they emerge each month. To help view the progression of change, we fitted a trend line to the year-over-year changes for the period since late 2022 – when the Post-Vaccine Wave of new demand for office space subsided.
Here is the chart for Boston. The trend line has clearly crossed from negative growth territory to positive, suggesting that Boston’s VODI is thawing.
And here is the chart for San Francisco, whose trend line is also inching into positive territory.
SAN FRANCISCO
In the case of Chicago, and especially Seattle, this type of chart makes the shift even more evident.
CHICAGO
SEATTLE
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago. New York City’s VODI increased almost 100 percent from 44 in August 2022 to 86 in March 2024. It has since declined to 61, though it remains higher than all other VODI markets except Los Angeles.
New York City and its massive densely populated area is the exception in America’s urban landscape. As such, it led the charge in transitioning back from the pandemic into renewed in-person office attendance. It continues to lead the way as its thawed office market takes a breather.
Like New York City, Los Angeles’ VODI increased sharply, from 45 in February 2023 to 101 in April 2024. Although it has declined to 80 since then, new demand for office space in Los Angeles continues to lead the pack with the highest level among VODI markets.
Read VODI impacts on local markets
Read VODI impacts on local markets
All VODI markets but one experienced positive growth compared to a year ago:
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw.
New demand for office space remains the highest in Los Angeles and New York City, though after gaining significant momentum over the last two years, both cities have seen their VODI recede recently.
The office market in Washington, D.C., the only city whose VODI declined year-over-year, may be paralyzed in anticipation of the presidential election.
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LOCAL
BOSTON
SAN FRANCISCO
CHICAGO
SEATTLE
With one exception, new demand for office space increased year-over-year in all VODI markets:
San Francisco, Boston, Chicago, and Seattle are finally beginning to thaw. In Chicago and Seattle, the upward curvature of the VODI’s path is clearly visible.
The VODI’s volatility makes it difficult to discern a change in Boston and San Francisco. To get a better sense, the charts below show each city’s VODI and their changes compared to 12 months earlier, as they emerge each month. To help view the progression of change, we fitted a trend line to the year-over-year changes for the period since late 2022 – when the Post-Vaccine Wave of new demand for office space subsided.
Here is the chart for Boston. The trend line has clearly crossed from negative growth territory to positive, suggesting that Boston’s VODI is thawing.
And here is the chart for San Francisco, whose trend line is also inching into positive territory.
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago. New York City’s VODI increased almost 100 percent from 44 in August 2022 to 86 in March 2024. It has since declined to 61, though it remains higher than all other VODI markets except Los Angeles.
New York City and its massive densely populated area is the exception in America’s urban landscape. As such, it led the charge in transitioning back from the pandemic into renewed in-person office attendance. It continues to lead the way as its thawed office market takes a breather.
Like New York City, Los Angeles’ VODI increased sharply, from 45 in February 2023 to 101 in April 2024. Although it has declined to 80 since then, new demand for office space in Los Angeles continues to lead the pack with the highest level among VODI markets.
In the case of Chicago, and especially Seattle, this type of chart makes the shift even more evident.
Seattle stands out as having the highest year-over-year growth, in excess of 100 percent. That sharp growth reflects an especially low baseline, as the Seattle VODI dipped sharply in August and September of 2023. If we sidestep that dip and consider the Seattle VODI’s growth starting in July 2023, before the dip, it was still an impressive 45.2 percent.
Boston, San Francisco, and Chicago also exhibited substantial VODI growth from last year, in excess of 10 percent each.
The Los Angeles and New York City VODIs grew only modestly, less than 10 percent from a year ago.
Washington, D.C., stands out as the only tracked market whose VODI declined, falling more than 20 percent year-over-year.
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The thawing of the office market is not taking place evenly across all markets. To obtain insight into specific markets, we applied the same metaphoric magnifying glass that we used for the national VODI, but city-by-city. The charts below show each city’s VODI along with their changes compared to 12 months earlier, as they emerge each month. To help view the progression of those changes, we fitted a trend line to them for the period from late 2022–when the spike of new demand for office space subsided at the end of The Reset.
Los Angeles
Given the robust growth of new demand for office space in Los Angeles, it should come as no surprise to see a steep positive trend line there.
NEW YORK CITY
Despite some pullback in Q2 of 2024, New York City shows a steady increase in the 12-month VODI change trend line.
BOSTON
While the growth of the Los Angeles VODI and even the New York City VODI is fairly clear, Boston’s VODI is harder to assess. However, the trend line fitted to its 12-month changes helps see that Boston’s VODI is thawing, too. The crossing of the trend line from negative to positive means that the Boston VODI is slowly shifting from decline to growth.
CHICAGO AND SEATTLE
Applying the same exercise to Chicago and Seattle’s VODIs reveals a similar pattern to Boston’s though it is less progressed and still lurking beneath the surface, so to speak. Those cities’ fitted trend lines are just now crossing from negative to positive territory.
San Francisco and Washington, D.C.
Unlike the other VODI cities, new demand for office space in San Francisco and Washington, D.C. does not appear to be thawing (at least not yet). Despite some fluctuations, the fitted trend lines in both cities are essentially flat.
The heavy presence of the TAMI sector in San Francisco, with its stronger embrace of remote and hybrid work, can help explain that city’s VODI performance. Washington, D.C., does not have a similar TAMI presence to San Francisco’s, but both cities stand out for having two of the nation’s most educated workforces, and perhaps that resemblance holds some clues.
In San Francisco, even though demand by square footage has been largely flat, the count of new tenants has shown positive growth, as demand has been driven by smaller tenants. While small tenant requirements don’t add up to as much square footage as larger requirements would, an increasing count of new tenants carries a positive signal as to where the demand for office space might be headed.
Read more local VODI trends
Read more local VODI trends
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
LOCAL
Finally, Washington, D.C. is the only city whose VODI declined year-over-year, falling 20.5 percent from 44 in September 2023 to 35 in September of this year.
While not all office demand in Washington, D.C. is driven by the federal government, it is certainly the prime mover. Given the proximity of the upcoming presidential election in November, it is likely that decisions around office space are being held up by prospective tenants waiting to see what the future holds. Put differently, the city’s office market may be paralyzed in anticipation of the presidential election.
VTS Office
Demand Index
(VODI)
QUARTERLY REPORT
National
Local
KEY TAKEAWAYS FROM THIS REPORT
The national VODI receded by 8.1 percent from a quarter ago, in line with seasonal norms. However, it increased by 11.8 percent from a year earlier and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
NEXT
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
All VODI markets but one experienced positive growth compared to a year ago:
NEXT
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
NEXT
The national VODI receded by 8.1 percent from a quarter ago, in-line with seasonal norms. However, it increased by 11.8 percent from a year earlier, and that overall growth trend – which we have dubbed the thawing of the office market – is likely to continue.
Explore nationwide trends
NATIONAL
The decline is in line with normal seasonal trends. During 2018, 2019, 2022, and 2023 (glossing over abnormal pandemic years), the VODI declined by 13.8 percent on average from June to September.
In September, the national VODI was 57. That level reflects a modest decline from one quarter ago. Quarter-over-quarter, the VODI declined by 8.1 percent from a level of 62 in June. The VODI tends to be a fairly volatile series, and we consider movements of less than ten percentage points to be modest.
SEE MORE NATIONAL TRENDS
As VODI reports have noted time and again, office-using industries differ from one another in terms of their willingness to accommodate remote and hybrid work. The FIRE sector, for example, presents as more traditional, putting greater emphasis on working from the office, whereas the TAMI sector – and especially the tech sector – has leaned in favor of remote work.
But that may be changing. As recently as the second half of 2023, tech-heavy cities experienced weaker VODI performance, but that pattern has flipped in recent months.
On the top, the following chart plots the change in city-specific VODIs over the last six months of 2023 against a measure of how tech-centric their office space has been. It shows that tech-heavy cities had weaker VODI performance than others in the second half of 2023.
But on the bottom is a chart for the six months ending in September 2024 shows that in the last six months, the VODI performance of tech-heavy cities was significantly stronger.
View impact on VODI
The tech sector, which has been the most resistant to returning to the office, seems to be shifting towards a more favorable view of on-site work.
NATIONAL
From January 2018 to March 2020, new office demand fluctuated around a level of 100. In some cities, there was a noticeable downward trend in advance of the pandemic: Chicago, Los Angeles, Seattle; in the other cities the VODI was more ambiguous as to whether it was flat or slightly upward trending.
Pre-Pandemic
In Spring 2020 new office demand fell sharply to the “pandemic low.” Nationally, the VODI fell from 102 in March 2020 to 16 in June 2020, a decline of 84 percent. In some cities the sharp fall was followed by a quick v-shaped rise (New York City and Los Angeles); In others, there was a prolonged u-shaped trough (Washington, D.C., San Francisco, Boston, Chicago, and Seattle).
The Crash
From June 2020 through the end of that year, new office demand generally remained very low. In some cities, such as Boston, Chicago, and Washington, D.C., the VODI remained more or less flat during this period. In others, such as San Francisco and Seattle, and most notably in New York City and Chicago, this period saw new office demand begin to recover, foreshadowing the phase that was to follow.
The Trough
After vaccines were introduced in early 2021 a sense of return-to-normalcy pervaded. Nationally, the VODI rose from 33 in January 2021 to 85 in June 2021, as demand that had been waiting on the sidelines during The Trough entered the market all at once in a short period. Once that pent-up demand was spent, the VODI quickly subsided from 87 in August 2021 to 61 in October 2021. Although cities whose economies are more remote work-friendly exhibited substantially lower levels of new office demand, all cities experienced a reset.
The Reset
Since October 2021 the VODI has been seemingly stagnant. It trended downward slightly in the earlier part of the period, and bottomed out in late-2022 and early-2023. Since then, it has slowly begun gaining new momentum.
The Thawing
Note: Location quotients measure the under- or over-representation of an industry in a city. Here, we used the square footage of the tech sector’s new office requirements over the prior 24 months, and determine tech location quotients as the ratio of the tech sector’s share of a city’s total new requirements and its share of all VODI markets’ total new requirements.
Read VODI impacts on local markets
Read VODI impacts on local markets
All VODI markets but one experienced positive growth compared to a year ago:
LOCAL
BOSTON
The thawing of the office market is not taking place evenly across all markets. To obtain insight into specific markets, we applied the same metaphoric magnifying glass that we used for the national VODI, but city-by-city. The charts below show each city’s VODI along with their changes compared to 12 months earlier, as they emerge each month. To help view the progression of those changes, we fitted a trend line to them for the period from late 2022–when the spike of new demand for office space subsided at the end of The Reset.
Los Angeles
Given the robust growth of new demand for office space in Los Angeles, it should come as no surprise to see a steep positive trend line there.
NEW YORK CITY
Despite some pullback in Q2 of 2024, New York City shows a steady increase in the 12-month VODI change trend line.
BOSTON
While the growth of the Los Angeles VODI and even the New York City VODI is fairly clear, Boston’s VODI is harder to assess. However, the trend line fitted to its 12-month changes helps see that Boston’s VODI is thawing, too. The crossing of the trend line from negative to positive means that the Boston VODI is slowly shifting from decline to growth.
CHICAGO AND SEATTLE
Applying the same exercise to Chicago and Seattle’s VODIs reveals a similar pattern to Boston’s though it is less progressed and still lurking beneath the surface, so to speak. Those cities’ fitted trend lines are just now crossing from negative to positive territory.
San Francisco and Washington, D.C.
Unlike the other VODI cities, new demand for office space in San Francisco and Washington, D.C. does not appear to be thawing (at least not yet). Despite some fluctuations, the fitted trend lines in both cities are essentially flat.
The heavy presence of the TAMI sector in San Francisco, with its stronger embrace of remote and hybrid work, can help explain that city’s VODI performance. Washington, D.C., does not have a similar TAMI presence to San Francisco’s, but both cities stand out for having two of the nation’s most educated workforces, and perhaps that resemblance holds some clues.
In San Francisco, even though demand by square footage has been largely flat, the count of new tenants has shown positive growth, as demand has been driven by smaller tenants. While small tenant requirements don’t add up to as much square footage as larger requirements would, an increasing count of new tenants carries a positive signal as to where the demand for office space might be headed.
Read more local VODI trends
Read more local VODI trends
The indications of gradual new growth in office demand varied across markets, showing up most clearly in Los Angeles and New York City, and altogether absent in San Francisco and Washington, D.C.
LOCAL
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