The United States’ business sector is booming. Don’t believe me? What if I told you that vacancy rates for office space are falling in 70% of the country? It’s true, according to commercial real estate services firm Cassidy Turley. Turley’s chief economist, Kevin Thorpe, notes that “demand for office space is still subpar, but, nevertheless, it has been consistently positive for multiple, consecutive quarters. At the same time, new supply remains extremely constrained.”
In fact, demand for office space has now exceeded new supply for over two years. So the office sector is clearly tightening in most cities across the country. It’s still a tenant’s market in most U.S. cities, meaning businesses still have leverage when negotiating for lower rents and attractive concession packages. But because of limited new supply, the pendulum is slowly shifting from a tenant’s market to a landlord’s market. Supply/demand fundamentals suggest the bulk of the country will be pushing office rents upward by this time next year.”
The top 10 strongest markets in terms of demand for office space were Houston, with 1.7 msf of net absorption; New York City, with 1.3 msf; Phoenix, with 822,000 sf; Atlanta, with 740,000 sf; Denver, with 668,000 sf; Chicago, with 659,000 sf; Los Angeles, with 561,000 sf; San Mateo County, CA, with 516,000 sf; Seattle, with 499,000 sf; and Central New Jersey, with 467,000 sf.
The top 10 strongest markets in terms of rent growth were Denver, with 9.0% year-over-year rental appreciation; New York City, with 8.1%; Oakland-East Bay, with 6.3%; Austin, with 6.2%; San Jose, with 6.0%; Los Angeles, with 5.3%; Baltimore, with 5.3%; San Mateo County, CA, with 4.4%; Houston, with 4.3%; and San Francisco, with 3.9%.
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