The second quarter rate ended at 14 percent compared with 14.3 percent in the prior quarter and 15.6 percent in the year-ago quarter. Vacancy remains above the generally accepted equilibrium rate of 10 to 12 percent, a sign that tenants continue to call the shots in a number of markets, Grubb & Ellis says.
Market conditions are tightest in New York City (7.4 percent vacant) followed closely by the adjacent Southern California markets of Riverside-San Bernardino and Orange County. Other markets with single-digit vacancy rates are found elsewhere in California (San Diego and Fresno), South Florida (Miami-Dade, Broward and Palm Beach counties), Nevada (Las Vegas and Reno) and Washington, DC.
At the other extreme, three markets have vacancy rates above 20 percent: San Mateo (south of San Francisco), Dallas-Fort Worth and Detroit.
Competitive office space under construction crept up again to end the quarter at 64.3 million square feet, 10 percent above the prior quarter and 55 percent above the year-ago quarter. However, construction activity is just half the 124.9 million square feet recorded in the third quarter of 2000, the peak of the prior expansion cycle.
Average asking rental rates continued to march higher, up by 5.9 percent and 5.0 percent for Class A and B space, respectively, over the past four quarters, according to the report.
