The US office market saw its largest quarterly decline in vacancy rates since 2007 for midyear 2011, data released from Cushman & Wakefield reveals. The numbers show that the average vacancy rate for US central business districts fell to 13.9%–down from 14.6 percentage points from the end of Q1 2011.
According to Maria Sicola, executive managing director and head of Americas Research at Cushman & Wakefield, the numbers are surprising, given that they reflect growth fairly early in the year. But they are also fairly predictable, since not much new construction has come on line and the downturn precipitated a flight to quality.
“A lack of new construction and supply in any way and any form, including sublease space coming on the market is clearly the other element of this equation,” Sicola says. “But there is no question that leasing velocity is dramatically increased year over year.”
Primary markets like Manhattan, San Francisco and Washington, DC saw the lowest vacancy rates, with quarterly changes that in many cases were below that for the national average, which was -0.7%.
“The gateway cities, the larger urban markets, have really been leading the recovery,” Sicola says. “We are seeing vacancy rates begin to decline in some of the secondary or second tier markets as well. They are not really declining quite as rapidly, but they are still seeing declines pretty much across the board.”
One slight anomaly in the findings: despite a lack of supply and new construction, average rental rates were $35.86 per square foot at midyear, a $0.63 decline compared to the same period last year. And the average asking rent for Washington, DC–a primary market–declined $0.29 for the quarter, to $50.
As Sicola points out, however, this is because the rents are based upon current supply in any particular market. “Sometimes it’s a case of where statistics can be a little misleading,” she says. “These are rents based upon what’s available–so what is being asked for the space that’s on the market.” ( credit m, sicola, globe st)