Downtown Office Market Recovery Slowing in U.S., Boston and Manhattan Lead Declines
Based on Cushman & Wakefield's Third Quarter 2011 statistics for U.S. Central Business Districts (CBDs), the office market recovery in multiple downtowns across the U.S. has slowed over the past three months.
The overall average vacancy rate for office space in U.S. CBDs remained unchanged from midyear, ending the third quarter at 13.8 percent. Year-over-year the vacancy rate declined 1.1 percentage points from 14.9 percent. Eighteen of the 30 U.S. CBDs tracked by Cushman & Wakefield did chart quarterly declines in vacancy - though most not more than 1.0 percentage point - with New Haven, Conn., Midtown South Manhattan and Boston among the markets with the most significant declines.
Year-to-date leasing activity totaled 58.7 million square feet at the end of the third quarter, up 22.8 percent from the 47.8 million square feet leased at this time last year, and the strongest first nine months of the year since 2007. However, with 16.9 million square feet of new leases signed, third quarter activity was notably slower than that of the second quarter, when 23.6 million square feet of new leases were signed.
"Over the past several quarters we saw a surge in leasing activity, pushing vacancy levels down in many markets across the country," said Maria Sicola, executive managing director of Research for Cushman & Wakefield in the Americas. "While the office market remains on the road to recovery, the pace has slowed. There is clearly still demand and with new supply limited there is now some upward pressure on rental rates."
Average asking rents for U.S. CBDs increased for the second consecutive quarter to $36.80 per square foot, up $0.35 from midyear. Average asking rents rose in 12 of the CBDs tracked, with San Francisco, Miami, Houston and Dallas recording the highest quarter-over-quarter increases, while average asking rents declined in 16 markets and remained unchanged in the remaining two.
Absorption totaled 9.0 million square feet year-to-date, up from negative 1.1 million square feet at this time last year. Nearly three-quarters of the CBDs tracked by Cushman & Wakefield reported positive absorption at the end of the third quarter, as well as year-over-year increases in absorption.