Office Vacancies Rise for a Second Quarter

The Q1 vacancy rate in the United States office market increased by 35 basis points to clock in at 12.77 percent, according to a recent report. This marks the second consecutive quarter of increased vacancies on a national level, says Colliers International.

Central business district (CBD) vacancies generally held steady; while 22 of the CBDs surveyed recorded a decrease in vacancy in the January through March period, 29 recorded a spike.

Suburban vacancies jumped by 54 basis points in Q1, to 13.80 percent. Increases in office vacancy occurred in 39 suburban markets while 14 witnessed a decline.

Nationally, Class A vacancy rates increased from 11.28 percent to 11.76 percent, while B and C class vacancy rates jumped 25 basis points to 13.64 percent.

Absorption, or the change in occupied space, swung to the negative during the first quarter, measuring negative 3.0 million square feet (msf), decreasing from the previous quarter's absorption of 9.8 msf. A year ago, Q1 absorption had increased by 12.5 msf, according to Colliers International.

Alongside this negative first quarter absorption, another 17.8 msf was added to the office market, with an additional 119.4 msf under construction. While construction activity was expected to fall, office developments in the pipeline actually increased by 10.6 msf.

As for rents, downtown Class A lease rates increased 2.6 percent over the previous quarter, while the suburbs registered no change. In the last year, downtown lease rates have increased 15.3 percent and suburban rents have increased 9.2 percent. Class A downtown rents now average $49.84 per square foot (psf) and $31.08 psf (unweighted). For suburban office space, the national average rent now comes in at $28.84 and $26.83 (unweighted).

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