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Office Vacancy Rate Remains Flat, Asking, Effective Rents Increase
Maintaining a steady balance between added supply and positive net absorption, the office market recorded no change in vacancy for the third quarter in a row, according to preliminary Q4 2017 numbers from Reis. Currently at 16.3%, the national office vacancy rate held steady most of the year climbing from a low of 16.1% at year-end 2016.
Reis Senior Economist Barbara Byrne Denham says that vacancy increased in 33 of 79 Metros, but the increase exceeded 0.2% in only 13 metros, led by San Jose, which experienced a vacancy rate increase of 1.5%. The effective rent declined in nine metros, the largest of which was a decline of 0.5% in Long Island.
– Asking and effective rents increased 0.6% – the highest quarterly growth rate in six quarters. For the year, rent growth was 1.8%.
– Construction fell to seven million square feet from 8.3 million last quarter and 10.7 million in the Q4 2016
– Net absorption was in line with construction at 5.2 million
– Cumulative new construction of 37.6 million square feet was just above the level built in 2016, 36.6 million square feet
– Net absorption for the year of 21 million square feet pales in comparison to last year’s 29.1 million square feet
– Combined, this pushed the vacancy up 20 basis points for the year
– At 8.7%, New York City once again had the lowest vacancy rate in Q4 followed by San Francisco at 9.8%
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