Job openings (thousands) Real personal consumption expenditures ($ trillions) Job openings declining as employers gain leverage Consumer spending continues to steadily grow 14,000 12,000 10,000 8,000 6,000 4,000 2,000 $17 $16 $15 $14 $13 $12 $11 $10 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2020 2021 2022 2023 2024 U.S. OFFICE OVERVIEW U.S. office occupiers had their most active quarter since the pandemic onset, leasing 52.9 million s.f., a post-pandemic high for the third straight quarter. This reflected 4.9% growth quarter-over-quarter (QoQ) and 17.6% growth year-overyear (YoY), with Q4 volume surpassing 92% of pre-pandemic averages. Geographic variance is narrowing as the recovery spreads more broadly. Sun Belt markets lead with over 95% of pre-pandemic activity over the last six months, while gateway markets have recovered to 76% of pre-pandemic activity in the second half of the year. Leasing strategies reflect the shift from a low-rate environment with a robust development pipeline to the current higher rate environment with diminishing highend options. First-generation new leases and relocations comprised less than 6% of leasing volume in 2024, while renewals and extensions generated a larger share. Effective rents in first-generation space grew nearly 17% YoY, rebounding from 2023 softening. Second-generation leases and renewals both grew roughly 7% YoY. Asking rates continue to marginally increase, with same-asset rents growing 0.2% in the past year. The sublease market showed steady improvement throughout 2024. New additions declined 26% YoY, with four of the last five months seeing fewer sublease additions than the monthly average since 2020. Backfills grew 11% YoY even as availability levels declined. Sublease vacancy levels have decreased for five consecutive quarters, returning to mid-2022 levels. Downsizing activity has declined over the past nine months. In 2024, tenants over 25,000 s.f. who acted upon a lease expiration cut their footprints by 7.9% on average, the most substantial YoY improvement since the pandemic began. Q4 saw the lowest downsizing rate to date, with expiring tenants associated with just over 200,000 s.f. in footprint reduction on nearly 7 million s.f. of leases. 63% of large tenants with expiring leases in 2024 either maintained their footprint or expanded, the largest share in recent years. The U.S. experienced 276,400 s.f. of net absorption in Q4, reversing the significant occupancy loss over the past 20 quarters. Despite this, vacancy rates rose by 9 bps amid a slight uptick in construction deliveries. Availability declined for the second consecutive quarter, by 7.8 million s.f., implying a continued positive outlook for absorption and vacancy rates. As development slows, vacancy rates in new supply are declining swiftly in most markets. 38 of the 53 office markets tracked by JLL have lower vacancy rates in new supply, and national vacancy is more than 400 basis points lower in newer product. Available supply in newer buildings has declined 25% from peak levels in 2022. Spillover demand is benefitting similar pockets of the market across multiple geographies, with tenants targeting buildings in top-tier locations or upgraded buildings. Secondgeneration new construction and renovated buildings have seen their share of leasing volume growing since early 2022. Highly amenitized buildings in CBD markets have gained nearly 2 million s.f. of occupancy in 2024, regardless of their original development year. ANNUAL REPORT 2024 | 41
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