CASSIDY TURLEY: VACANCIES DOWN, RENTS UP IN OFFICE SECTOR
WASHINGTON, D.C. — Office vacancy rates continued to decline in most metropolitan areas in the fourth quarter of 2013, according to Cassidy Turley. The brokerage also reports that rents are rising in more than 50 percent of the 80 U.S. markets tracked by the firm.
The U.S. office market absorbed 14.3 million square feet of office space in the fourth quarter, down from 15.3 million square feet in the third quarter. Despite the slight deceleration, the U.S. has now recorded occupancy gains for 14 consecutive quarters. The vacancy rate in the third quarter fell 20 basis points to 15.1 percent, and vacancy is now 220 basis points lower than its recessionary peak of 17.3 percent.
“Office vacancy is clearly tightening, but at a rate that is much slower than past recoveries,” says Kevin Thorpe, chief economist at Cassidy Turley. “Steady job growth and lack of new development has vacancy falling in 70 percent of the country, but the office sector is still adjusting to the new era of tenant downsizing and space efficiency.”
There was 55.2 million square feet under construction as the fourth quarter came to a close, down from 56.9 million square feet recorded in the prior quarter but up 32 percent from a year ago. The average asking rent during the fourth quarter of 2013 registered $22.02 per square foot, up 1.6 percent from the same period a year earlier, as 46 out of the 80 metros 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,” says Thorpe. “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 (+7.1 million square feet of absorption); Dallas (+4.2 million square feet); Houston (+3.9 million square feet); San Jose/Silicon Valley (+2.4 million square feet); Atlanta (+2.3 million square feet); Denver (+1.9 million square feet); Boston (+1.7 million square feet); Seattle (+1.7 million square feet); Chicago (+1.5 million square feet); and Miami (+1.3 million square feet).
The top 10 U.S. markets for rent growth in 2013 were San Francisco (+11.8 percent); New York (+9.5 percent); Denver (+7.8 percent); San Jose/Silicon Valley (+7.3 percent); Austin, (+7 percent); Dallas (+5.6 percent); Salt Lake City (+5.5 percent); San Mateo County (+4.9 percent); Oakland-East Bay (+4.4 percent); and San Diego (+4.3 percent).
— Staff reports