Secondary cities are seeing a modest increase in office occupancy in the first quarter of 2021. These secondary metro areas have less expensive office rent compared to nearby major markets. Net domestic migration has also driven the demand for office space by information technology, biosciences/medical/health care, and finance companies. Office occupancy continues to shrink by 84% of 891metros, including in the gateway cities of Boston, Chicago, New York City, Washington DC, Los Angeles, and San Francisco. However, office occupancy rose in a few secondary/tertiary markets in the first quarter of 2021, with a total positive absorption of 1.1 million.
In the West region, office occupancy increased in San Mateo County, San Diego, Sacramento, and Tucson. In the South region, office occupancy increased in Tulsa, Suburban Maryland, Fredericksburg, and Fort Myers/Naples. In the Northeast region, office occupancy increased in Brooklyn, Buffalo, and Syracuse. While the 1.1 million positive net absorptions in these secondary/tertiary markets is a drop in the bucket compared to the 41 million square feet of lost occupancy in 2021 Q1 (and 138.4 million square feet since 2020 Q2), the increase in occupancy in secondary/tertiary markets presages is an indicator of the resiliency of smaller markets which have cheaper office rent and more affordable homes which have resulted in net domestic in-migration. Companies such as Apple are moving to less expensive cities.