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Office Vacancy Rate Flattens, Net Absorption Rises
The office vacancy rate flattened in the fourth quarter of 2018 at 16.7%, according to Reis’ Q4 2018 report. By comparison, at year-end 2017 it was 16.4%, while at year-end 2016 it was 16.3%.
The latest Reis research shows both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.7% in the fourth quarter. At $33.43 per square foot (asking) and $27.13 per square foot (effective), the average rents have increased 2.6% and 2.7%, respectively, from the fourth quarter of 2017, barely above the rate of inflation: 2.5%.
Reis Senior Economist Barbara Byrne Denham writes, “Following three quarters of decelerating occupancy growth, net absorption rose to 7.3 million square feet. The fourth quarter tends to see the highest activity in both office completions and leasing.” She notes, a year ago, net absorption was 7.6 million square feet, higher than the previous quarters of that year. For construction, office inventory expanded by 10.4 million square feet in the fourth quarter, above the previous quarter’s 8.9 million square feet but below the three prior quarters’ average of 11.9 million square feet.
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