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Reis Reports National Office Vacancy Climbs
The national office vacancy rate climbed 0.1% to 16.6% in the second quarter, according to research by Reis. Vacancy increased in 39 of 79 metros in the quarter, with just two metros posting a decline in effective rent, as the gap between the “better” office markets and lagging ones widens and gets more pronounced.
Reis’ Senior Economist Barbara Byrne Denham notes, heading into the ninth year of the recovery, the office market has never seen the robust leasing activity of previous expansions, maintaining a steady but low level of absorption despite healthy office job growth.
Net absorption trailed previous quarters at 2.817 million square feet, down from an average of 5.78 million square feet absorbed per quarter in 2017. New completions fell to 8.07 million square feet, down from an average of 10.9 million square feet added per quarter in 2017.
Rent growth, in contrast, was healthier in the last two quarters than in the previous seven, as a number of metros had rent growth of 1% or more in the quarter and 4% for the year. The stronger metros helped buoy the national average more so than in previous quarters. The national average asking rent increased 0.7% in the second quarter, as did the effective rent which nets out landlord concessions. Average asking and effective rents have increased 2.5% and 2.6%, respectively, since the second quarter of 2017.
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