Office Vacancies Rise Nationwide in U.S.
New Supply Catalyst for Modest Rise
According to CBRE Group, Inc., vacant space in the U.S. office market rose modestly during the first quarter of 2017 (Q1 2017) to 13.0 percent. The 10 basis points (bps) increase was attributable to increased office supply.
The vacancy rate in suburban markets increased by 10 bps, to 14.2%, while downtown vacancy also increased by 10 bps, to 10.7%. Despite the quarter's overall increase, vacancy continued to fall in nearly half of the U.S. office markets, and the national office vacancy rate remains near its post-recession low.
"The office market appears to have reached equilibrium and the strong economy, including solid employment numbers, is likely to help offset rising supply," said Jeffrey Havsy, Americas' chief economist for CBRE.
The largest quarterly declines in vacancy were recorded in Kansas City (150 bps), Wilmington, DE (120 bps) and Tulsa (100 bps). Albuquerque, Tucson, Orlando, Las Vegas and Richmond, each declined by 70 bps or more. Among the markets with increased vacancies in the quarter was Nashville, which recorded a 250-bps rise in vacancy due to new construction. Cincinnati, Fort Worth, Salt Lake City, Houston reported rate increases of 80 bps or more.
"Several markets are likely to continue to soften, but the overall office market remains relatively healthy," noted Mr. Havsy.