This writeup reflects data from U.S.-only respondents. For a report on global conditions, see the SIOR Sentiment Survey at SIOR Sentiment Report.

The office and industrial commercial real estate market conditions continued to improve in the second quarter of 2021, according to SIOR members who participated in SIOR’s quarterly Snapshot Sentiment Report.¹In the second quarter of 2021, the SIOR Commercial Real Estate Index rose to 130.5, up 7% from the prior quarter and 45% from one year ago. An index above 100 indicates that market conditions are positive. Industrial real estate market conditions are broadly positive, with the SIOR Industrial Index rising to 145.7, up 12% from the prior quarter and 51% from one year ago. Respondents also reported an improvement in office market conditions, but overall conditions remain negative (index is less than 100). The SIOR Office Index rose to 95.4, up 18% from the prior quarter and 28% from one year ago. Recall that the second quarter of 2020 can be considered the nadir of the pandemic when the economy went into a shutdown, office-using workers were told to work from home, and many retail establishments had to close, so the strong year-over-year growths reflect the normalization of business conditions.

All regional indices (combined office and industrial) rose compared to the prior quarter and registered over 100 (positive conditions). Conditions were strongest in the West (137.6) and Midwest (136.2) regions compared to the South (131.0) and the Northeast (129.9).

Leasing activity continues to pick up, with 73% of respondents reporting that leasing activity across both office and industrial markets  increased in the second quarter of 2021, compared to one year ago.

Rents are also rising, with 65% of respondents reporting higher rents compared to one year ago. With improving rental conditions, more than half of respondents at 58% reported that tenant concessions were favorable for landlords.

Respondents reported vacancy rates to be falling, with 62% of the respondents reporting that vacancy rates are lower than one year ago. However, the decline in vacancy rates is likely occurring in the industrial segment because office vacancy rates continue to rise.

A lower share of respondents reported a “glut” in subleasing, down at 26% while 58% reported there is “little” subleasing activity.

A majority of respondents, 73%, have a positive outlook about real estate conditions in their markets in the coming quarter.

Indeed, economic conditions continue to improve. In the second quarter, gross domestic product (GDP) expanded at an annualized² rate of 6.5%, bolstered by the strong surge in consumer spending for travel and recreation in the wake of a big vaccination rollout and the relaxation of masking and social distancing guidelines pushed. Real GDP ($19.35 trillion) is now running at 2% above the pre-pandemic level in the first quarter of 2020 ($18.9 trillion).

1-159 respondents

2-Annualized rate is the rate of growth if the economy were to continue growing at the current pace for four quarters.