WASHINGTON, DC – High rates of inflation, shifting stock markets, continued supply chain strains and skyrocketed gas prices left industrial and office brokers uneasy during the recent Society of Industrial and Office Realtors® (SIOR) Snapshot Sentiment Report, which provides feedback from hundreds of member-brokers on the performance of transactions during Q2 2022, along with their outlook for the next six months.
While still thriving, volatile conditions influenced a drop in overall confidence this past quarter, with SIORs reporting a 5.3 (out of 10) confidence in the market, down from 7.4 in Q1. While a snapshot in time, with conditions improving toward the end of Q2, both industrial and office specialists noted a drop in confidence, as well as a drop in on-schedule transactions. Industrial SIORs completed 77% of transactions on schedule, down from 84% last quarter. Office specialists completed 70% on schedule, down from 76% in Q1.
While uncertainty over the return to the office loomed at the beginning of 2022, trepidation over inflation and economic turmoil became the main topic of concern. “Consistent commentary among clients is that the future is very uncertain and a recession likely coming,” notes an industrial specialist in northern California. “ Another SIOR in Texas fears conditions will remain volatile until next summer, reporting that “inflation and supply chain still remain a change, that along with rising interest will cool the market in the summer of 2023.”
Reporting indicated a decline in both industrial and office leasing activity in the second quarter, with 31% of industrial SIORs reporting an active leasing market, and 37% of office brokers reporting higher leasing activity. Subleasing space remains low for industrial as well, with only 4% reporting adequate or extensive amounts available. And while the return to office began in Q1, subleasing space became more available in Q2, with 51% reporting a large amount of availability, up from 38% last quarter. High vacancy also increased from 1% to 7% in the industrial sector, and 49% for the office sector (up from 28%).
Landlords continue to hold the bargaining power in the industrial sector, with 83% of SIORs reporting limited or no tenant concessions available. For office tenants, there is more promise, as only 11% of SIORs notes little to no concessions, down from 32% last quarter.
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About SIOR (www.sior.com)
The Society of Industrial and Office Realtors ® (SIOR) is the leading society for industrial and office real estate professionals. Only the industry’s top professionals qualify for the SIOR designation and adhere to the highest levels of accountability and ethical standards. Today, there are 3,600 SIOR members in 45 countries. www.sior.com