The U.S. office market continues to be one of the economy’s growth sectors, based on what the national real estate firm Transwestern gleans from the 48 of its markets that reported first-quarter results.
More than 45% of those markets—22, to be exact—registered improvements in direct vacancy, and 30 recorded increased in direct and sublet vacancy in the first quarter.
Overall, the office market’s vacancy rate, at 9.7% in the latest quarter, remained stable compared to the same period a year ago. And the vacancy rates were considerably lower in some of the country’s hottest real estate markets, such as Seattle (8.2%), Orlando (7.8%), Tampa (7.9%), and San Francisco (8.2%).
San Francisco was also the first-quarter leader in new absorptions, at more than 1.5 million sf, followed by Seattle, Dallas/Fort Worth, and San Jose, which was the leader in trailing four-quarters net absorption (nearly 7 million sf).
All told, the U.S. market absorbed 14.1 million sf of office space in the first three months of 2018. That makes 31 consecutive quarters of positive absorption growth, although the absorption rate still lags three- and five-year quarterly averages.
Conversely, 1Q18 represented the fourth straight quarter of declines in new office construction, which stood at 141.1 million sf that period. Manhattan is by far and away the most active office construction market in the country, with nearly 18 million sf in starts in the first quarter. (Manhattan also has 432.9 million sf of office inventory, whose vacancy rate was 9.1%.) The next closest construction market, DFW, had 8.29 million sf in starts. (DFW’s vacancy rate was 16.7% in the first quarter.)
(The average new construction starts for Transwestern’s markets were 2 million sf.)
The number of office employees rose to 36 million, representing a 1.9% annual growth rate.
Transwestern states that the average asking rents continued to climb in the first quarter, marking the 20th consecutive month of increases. Charlotte, N.C., saw the biggest jump in asking rents, to 15.3%, followed by East Bay/Oakland, Calif. (9.5%) and Atlanta (7.7%).