IRVINE AND SILICON VALLEY, CALIF. — The U.S. office real estate sector’s fundamentals appear to be stalling after years of slow recovery, as vacancy rates remain stubbornly high despite a healthy labor market and growing national economy, according to Ten-X’s latest U.S. Office Market Outlook. Ten-X cited Reis data that shows the national vacancy rate for office space has held steady at 16 percent for three consecutive quarters. Vacancies are now 40 basis points lower than a year ago and 160 basis points below their cyclical peak, but they remain well above levels seen during the last economic cycle. Only 70 million square feet of new supply has been occupied during each of the last two quarters. Rent growth has hit a similar slump, with effective rents edging up just 0.4 percent in the third quarter of 2016 and 2.8 percent over the past year — the slowest annual growth since mid-2014. The downturn in office fundamentals comes despite a strong labor market that continues to add jobs and a steadily expanding economy. Low unemployment, consistent payroll gains and rising wages should offer a boost to overall demand for office space, though the national economic picture is marked by stark differences among markets …
