Office Vacancy Continues to Decline Across the U.S.
WASHINGTON, DC - Cassidy Turley, a leading commercial real estate services provider in the U.S., reported today that vacancy rates continued to decline in most metropolitan statistical areas in the fourth quarter of 2013, and rents are rising in more than 50% of the U.S.
U.S. office markets absorbed 14.3 million square feet (msf) of office space in the fourth quarter, down from 15.3 msf in the third quarter. Despite the slight deceleration, the U.S. has now registered occupancy gains for 14 consecutive quarters. Vacancy rates in the third quarter fell 20 basis points (bps) to 15.1%. Vacancy is now 220 bps lower than its recessionary-peak of 17.3%.
“Office vacancy is clearly tightening, but at a rate that is much slower than past recoveries,” said Kevin Thorpe, Chief Economist at Cassidy Turley. “Steady job growth and lack of new development has vacancy falling in 70% of the country, but the office sector is still adjusting to the new era of tenant downsizing and space efficiency.”
There was 55.2 msf under construction as the fourth quarter came to a close, down from 56.9 msf registered in the prior quarter, but up 32% from a year-ago. Average asking rents in the fourth quarter of 2013 registered at $22.02, up 1.6% from the same period a year-ago, as 46 out of the 80 metros tracked registered rent growth.
“Rent growth is still being powered by energy-driven and tech-driven markets, but the rent recovery is clearly beginning to roll into more pockets of the country,” Mr. Thorpe continued. “Supply/demand fundamentals suggest the majority of the country will be pushing office rents upward by this same time next year.”
In terms of demand, the top 10 U.S. markets for 2013 were New York, with 7.1 msf of net absorption; Dallas, with 4.2 msf; Houston, with 3.9 msf; San Jose/Silicon Valley with 2.4 msf; Atlanta, with 2.3 msf; Denver, with 1.9 msf; Boston, with 1.7 msf; Seattle, with 1.7 msf; Chicago, with 1.5 msf; and Miami, with 1.3 msf.
The top 10 U.S. markets in terms of 2013 rent growth were San Francisco, with 11.8% rent growth; New York, at 9.5%; Denver, with 7.8%; San Jose/Silicon Valley, with 7.3%; Austin, with 7.0%; Dallas, with 5.6%; Salt Lake City, with 5.5%; San Mateo County, at 4.9%; Oakland-East Bay at 4.4%; and San Diego, with 4.3% rent growth.
Cassidy Turley’s full fourth quarter office and industrial market reports will be available on Cassidy Turley’s website January 13.
About Cassidy Turley
Cassidy Turley is a leading commercial real estate services provider with more than 3,800 professionals in more than 60 offices nationwide. With headquarters in Washington, DC, the firm completed transactions valued at $22 billion in 2012, manages approximately 400 million square feet on behalf of institutional, corporate and private clients and supports more than 23,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with a full spectrum of integrated commercial real estate services—including capital markets, tenant representation, corporate services, project leasing, property management, project and development services and research and consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit www.cassidyturley.com for more information.