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Office Vacancy Rate Remains Flat Despite Job Growth
The national office market continued along at a lackluster pace, recording the lowest quarterly net absorption in three years in Q2 2017, according to Reis. The vacancy rate remained flat at 16%, compared to a year ago, when the vacancy rate was 16.1%.
Reis senior economist Barbara Byrne Denham noted, in the last expansion, the U.S. vacancy rate fell from a high of 17% in 2003 to a low of 12.5% in 2007. In the current expansion, which is now seven quarters longer than the previous expansion, the vacancy rate has fallen from a high of 17.6%, though tenants are leasing far fewer square feet per added employee than in past cycles.
New construction of 7.5 million square feet was also low by historic standards, but developers have been cautious throughout these last few years and have expanded the office supply at a less aggressive rate than in previous cycles, she says.
Key Reis Q2 2017 office report findings:
- Overall office employment growth for U.S. metro areas in 2017 has grown at a slightly slower pace, but a still healthy rate of 2%
- Net absorption, or occupancy growth, of 3.3 million square feet was the lowest since the second quarter of 2014
- Asking rents increased 0.4% to $32.24-per-square-foot
- Effective rents increased 0.3% as concessions played less of a role in negotiations
- Asking and effective rents have both increased 1.6% since the second quarter of 2016. This is also the lowest annual rate of rent growth since 2011
- New York City’s 8.8% vacancy rate once again was the lowest in Q2 2017, followed by San Francisco at 9.2%
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