First Quarter Office Sector Fundamentals Improving, Demand Remains Subpar
Demand for office space in the first quarter of 2013 flattened as businesses continue to push for space efficiency, according to research released by Cassidy Turley, a U.S. commercial real estate services provider.
U.S. office markets absorbed 3 million square feet (msf) of office space in the first quarter, down from 23 msf in the fourth quarter. Although this marks the third straight year of consistent net growth in the office sector, the first quarter demand figures were the weakest since the recovery began in 2010. Vacancy rates in the first quarter remained flat at 15.4%—still 200 bps higher than pre-recession levels.
“Market fundamentals continue to improve, but at the same time, the office sector is clearly going through a transformation,” said Kevin Thorpe, Chief Economist at Cassidy Turley. “Many businesses are reassessing space needs and recognizing they can function perfectly well with a smaller, more efficient footprint. As a result, job growth is not giving us the same pop in demand that we have grown accustomed to.”
Average asking rents in the first quarter of 2013 registered at $21.63, unchanged from the same period a year ago. New office construction increased from 41.8 msf in the fourth quarter to 48.9 msf in the first quarter of 2013.
“The development pipeline remains lean,” Thorpe said. “Even with a slight pickup this quarter, new supply coming to the market is still 30% below the norm. The supply constraints are critically important for restoring balance to the office sector.”
The top 10 strongest markets in terms of demand for office space were Dallas, with 728,000 sf of net absorption; Tampa, with 613,000 sf; Boston, with 610,000 sf; Denver, with 576,000 sf; Minneapolis, with 491,000 sf; Northern New Jersey, with 434,000 sf; Seattle, with 396,000 sf; Charlotte, with 328,000 sf; Raleigh-Durham, with 325,000 sf; and Suburban Maryland, with 299,000 sf.
The top 10 strongest markets in terms of rent growth were New York, with 11% year-over-year rental appreciation; Salt Lake City, with 10.9%; San Jose/Silicon Valley, with 10.3%; Austin, TX, with 6.6%; Denver, with 6.2%; Houston, with 5.6%; Dallas, with 4.7%; Nashville, with 4.3%; New Haven, CT, with 4.3%; and San Mateo, CA, with 3.4% rent growth.
You might like:
- The Internet Of Things And Water Management
- Look, Listen, And Learn To Find Leaks
- Top 10 States Ranked in Energy Efficiency Scorecard
- Green Buildings Improve Cognitive Function
- Facility Professionals Play Key Role In Strategic Workplace Decisions
- Survey Provides Insight To Energy Management Decisions
- Friday Funny: 10 Worst Cities For A Zombie Apocalypse
- Webinar: Cleaner Facilities & Flu Protection
- Did You Miss “The Impact Of Using Defendable Data To Assess & Budget For The Future” Webinar?
- Question of the Week: How Do You Support Productivity In Your Facilities?
- Did You Miss The “Smart Buildings, Internet of Things and What it all Means for Your Career” Webinar?
- Question Of The Week: HVAC Coil Cleaning Methods?
- China Wins Its First Emporis Skyscraper Award
- Motorized Shades Reflect Well On LEED Gold HQ
- Five Workplace Wellness Best Practices