In our last VTS Office Demand Index (VODI) report, we highlighted the nearly 20% YoY growth in new demand nationally, with certain markets such as New York City up even more (+40% YoY).
That trend has continued into 2024. Through February, national office demand is up 27% vs. the same period in 2023. While still 35% below pre-Covid levels, powerhouse markets like New York City and Los Angeles have started the year at or above pre-Covid demand levels.
The Resurgence of the Gateway Market
Institutional investors have recognized this shift, with sentiment from leaders like Boston Properties, Brookfield, and Blackstone implying a shift toward significant capital deployment this year.
VTS has analyzed our office demand data, the industry’s earliest leading indicator of office leasing, to forecast trends across three of the world’s most influential markets: New York City, San Francisco, and London. These markets exude an outsized influence in CRE due to their concentration of capital and talent.
Market Risk/Reward Analysis
An internal analysis conducted by VTS Research categorized these investment opportunities over the next 18-24 months as follows:
- Highest Risk/Reward: San Francisco
- Best Risk-Adjusted Return Profile: New York City
- Most Stable: London
Global Market Forecasts for 2024
The VTS Leasing Prediction Outlook provides a clear trajectory for new demand entering these markets. While London reached pre-Covid velocity as early as 2021, the U.S. gateway markets are now seeing a rapid catch-up.
| Market | Forecasted YoY Growth | Demand Context |
| New York City | +17% | Starting the year at or above pre-Covid levels. |
| San Francisco | +14% | The highest potential for high-yield "recovery" returns. |
| London | +6% | High stability; demand has remained at pre-Covid levels for ~3 years. |
VTS 4: Unlocking the Future of Leasing
With the launch of VTS 4, powered by the VTS Demand Model, we are bringing all of our predictive market data in-app to our customers for the first time.
This allows our customers to understand leasing trends 6-12 months before they are officially recorded. As a result, landlords and investors can make credible forecasts regarding the trajectory of leasing and net absorption, allowing them to act with precision while the rest of the market waits for trailing indicators.
Request a demo today for more information on VTS 4 or to unlock the full forecast for these markets.
FAQs
1. How does the VTS Demand Model predict leasing so far in advance?
The VTS Demand Model tracks "top-of-funnel" activity, specifically tenant tours and initial requirements—rather than waiting for signed leases. Because these activities occur 6-12 months before a lease is finalized, VTS users can see the "wave" of demand coming before it hits the public market.
2. Why is San Francisco considered the "highest risk/reward" opportunity?
San Francisco saw the most significant decline during the pandemic, but it is currently seeing a massive surge driven by the AI sector. The "reward" is the potential for rapid rent growth and value recovery, while the "risk" lies in the city's ongoing economic and social adjustments.
3. What is driving the shift in institutional investor sentiment?
Institutional giants like Blackstone and Brookfield are moving toward capital deployment because the VODI data shows that new demand is finally returning to pre-pandemic levels in major gateway cities. This indicates that the "bottom" of the market has likely passed for Class A assets in these regions.
