Downturn in Economy Continues to Drag Down U.S. Office Market
Office vacancies continued to increase for the third consecutive quarter, with the Q2 vacancy rate increasing 27 basis points to clock in at 13.24 percent, according to Colliers International.
Office vacancies continued to increase for the third consecutive quarter, with the Q2 vacancy rate increasing 27 basis points to clock in at 13.24 percent, according to Colliers International.
Nationally, Class A vacancy rates increased half a percentage point in both downtown and suburban markets, from 12.19 percent to 12.69 percent, while B and C class vacancy rates increased 8 basis points from 13.63 percent in Q1 to 13.71 percent in Q2.
Of the markets surveyed by Colliers, 18 central business districts saw a drop in vacancies, while 33 saw a spike. In the suburbs, 16 markets posted declining vacancy, while 38 experienced a jump.
Absorption, or the change in occupied space, continued its downward trajectory during the second quarter, measuring negative 1.4 million square feet (msf), as compared to negative 3.7 msf in Q1.
In addition, another 19.4 msf of new supply was delivered in the April through June period, almost 85 percent of which was in the suburbs.
In terms of rents, downtown Class A lease rates held steady during the first quarter, while suburban rents dropped 3.7 percent. From the year-ago quarter, downtown lease rates have risen nearly 7.6 percent; Class A downtown rents now average $49.40 per square foot (psf). Suburban rents have increased around 2 percent to $27.72 psf.
Markets that are currently experiencing pronounced weakness include Manhattan, suburban Los Angeles, suburban Las Vegas, Orange County and suburban San Jose. Those showing tentative signs of weakness include suburban Atlanta, suburban Chicago, and suburban Orlando.
In contrast, markets posting healthy office demand include suburban Dallas and suburban Houston. Those showing measured growth include suburban Boston and suburban Kansas City.
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