Of the 13 largest U.S. markets, nine had lower office vacancy and 11 had higher rental rates.
“The steady recovery of the U.S. office market continues,” Brook Scott, CBRE interim head of research, Americas, told MBA NewsLink. “As economic activity improves, investors have had an opportunity to increase rents in most markets.”
Both San Francisco and Seattle saw a 50 basis point decline, due to demand from technology companies. San Francisco had an 8.7 percent office vacancy rate while Seattle had a 15.2 percent office vacancy rate.
San Francisco saw the greatest increase in asking rents at 3 percent, while Boston came in a close second with a 2.5 percent increase.
Another office market report, from commercial real estate broker Cushman & Wakefield, New York, explained that technology, energy and new media continue to propel the office sector recovery.
“As a result, markets like San Francisco and Boston, despite having a fair amount of construction in the pipeline, expect continued strong demand over the next two years, keeping vacancy rates low and pushing prime asking rates upwards by 16 percent and 22 percent, respectively,” Maria Sicola, executive managing director of Americas research with C&W, explained in a special report, MBA NewsLink reported.
Sicola added that the Houston and Dallas office markets would particularly benefit from the thriving energy industry. Although vacancy rates are expected to remain high in Dallas, its central business district has experienced a “resurgence” of activity with Class A rents rising 3 percent.
In Manhattan, C&W reported that there is more than 10 million square feet of office space under construction — and nearly half is pre-leased.
“With positive absorption expected to continue in this thriving market, Class A rents will rise by nearly 15 percent on a cumulative basis,” Sicola noted, MBA NewsLink reported.
“On the other end of the spectrum are those markets whose tenancy foundations are built on a more traditional mix of sectors — financial, legal and professional business services, for example,” Sicola said, MBA NewsLink reported. “Businesses in these sectors have kept their growth plans on hold as they wait for stronger signs of U.S. and global economic recovery.”
“Los Angeles, Atlanta and Philadelphia would fit into this category of markets,” Sicola said, MBA NewsLink reported. “Perhaps not surprisingly, economic difficulties exacerbated by a polarized Congress is no more evident in any real estate market than Washington, D.C., which does not expect to see a return to recovery — balanced leasing fundamentals — until 2015.”
Sicola noted that conditions will favor tenants in these markets as asking rents will see little upward movement in the next two years.
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