Global Commercial Real Estate Firm Releases Quarterly Office Leasing
Report
CHICAGO--(BUSINESS WIRE)--
Office markets across the United States continue to perform strongly in
the third quarter, with stable leasing volumes, solid absorption, rising
asking rents and an increase in new construction, according to exclusive
research by global commercial real estate services firm Cushman &
Wakefield.
The tech and financial services sectors continued to dominate leasing,
with tech companies accounting for approximately 27% of large leases in
the quarter and financial services companies representing 17% of the top
leases. Tech-driven markets remain the tightest major markets in the
U.S., led by San Francisco with a vacancy rate of6.8%;
Puget Sound, Wash. (7.0%); Midtown South Manhattan (7.4 %);
Raleigh/Durham, N.C. (7.4%);and Charlotte, N.C. (7.5%).With the exception of Midtown South, each experienced a substantial
decline in vacancy rate in the third quarter compared to the second.
The pace of new leasing decreased slightly in the third quarter to 71.8
million square feet (msf), the slowest pace in nearly two years. New
leasing in 2018 now totals 226.2 msf, down from 241.4 msf in the same
period last year. Bolstered largely by the tech sector, 20 key markets
across the West dominated the demand for space, with leasing in those
areas totaling 85.0 msf in the first three quarters of the year and
accounting for 37.6% of new leasing nationally. Markets with the largest
leasing volume in the first nine months of 2018 included Silicon
Valley (19.5 msf), Midtown Manhattan (17.2 msf) and Chicago
(9.5 msf).
“The U.S. office market continues to be in good health,” said Revathi
Greenwood, Cushman & Wakefield Head of Americas Research. “While we see
some indicators decelerating, demand remains robust, especially in the
West and in the tech sector. We predict this momentum will carry over
into 2019.”
Office space continued to be absorbed at a solid pace throughout the
quarter. Leasing activity remained steady, and new construction
deliveries slowed slightly. The national vacancy rate dipped to 13.3%, a
number representing a slight decline from the previous quarter (13.4%)
but a slight increase from a year ago (13.2%). Net absorption – a key
measure of demand for office space – also dipped in the third quarter to
8.3 msf, down from 15.2 msf in the second quarter. In the first three
quarters, 31.1 msf of space was absorbed in the U.S., down from 35.4 msf
in the first three quarters of 2017. However, absorption was positive
for the 32nd consecutive quarter, indicating that demand for
office space has been growing for eight straight years. The West region
also accounted for 4.9 msf of absorption in the third quarter and 16.9
msf – or nearly 55% of all absorption – in the first three quarters.
Most markets experienced rising rents in Q3, with average asking rents
increasing 1.2% over the previous quarter to a record $31.29 per square
foot (psf). A total of 63 of the 87 markets tracked by Cushman &
Wakefield saw rents increase in the third quarter compared to the
second, marking the 23rd consecutive quarter that rent
increases exceeded decreases. Major markets with the fastest rent growth
over the past year included Orange County, Calif. (+17.2%); San
Francisco, North Bay (+14.5%); Midtown South Manhattan
(+10.4%); Portland (+9.9%); and Charlotte, N.C. (+9.7%).
For the first time since 2001, a market other than Midtown Manhattan had
the highest asking rent in the nation. Midtown South, which has
become the tech center of Manhattan, saw average asking rents of $76.42
psf, slightly higher than $76.12 psf in Midtown. The next three most
expensive markets were San Francisco at $74.72 psf; Downtown
Manhattan at $63.72 psf; and San Mateo, Calif., at $57.98.
Asking rents exceeded $50 psf in only one other market: Washington, DC,
at $54.41.
And while the volume of new space completed in the third quarter slowed
to 9.7 msf – roughly half the 18.1 msf delivered in the previous quarter
– the amount of space under construction continues to rise. Cushman &
Wakefield is tracking approximately 114.0 msf of space currently under
construction, up from 107.6 msf in the second quarter and the largest
volume the firm has ever recorded. Midtown Manhattan tops the
list, with 15.9 msf under construction, followed by Silicon Valley
at 5.3 msf. Relative to inventory, the markets with the most space under
construction are San Mateo, Calif. (8.8%); Brooklyn
(8.7%); Austin (6.9%); Seattle (6.9%); and Midtown
Manhattan (6.6%).
“Even with the increase in supply, office markets remain healthy,” said
Ken McCarthy, Principal Economist and Americas Head of Applied Research
at Cushman & Wakefield. “Most of the new construction is taking place in
tech-driven markets or in markets where demand growth has been strong.
This growth is helping meet occupiers’ demands for modern workplaces and
heightened efficiency, and is reshaping skylines across the country.”
About Cushman & Wakefield
Cushman & Wakefield (NYSE: CWK) is a leading global real estate services
firm that delivers exceptional value by putting ideas into action for
real estate occupiers and owners. Cushman & Wakefield is among the
largest real estate services firms with 48,000 employees in
approximately 400 offices and 70 countries. In 2017, the firm had
revenue of $6.9 billion across core services of property, facilities and
project management, leasing, capital markets, valuation and other
services. To learn more, visit www.cushmanwakefield.com
or follow @CushWake
on Twitter.
Source: Cushman & Wakefield
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For Cushman & Wakefield
Holly Amaya
+1 619 573 7224
holly@sandcpr.com
Source: Cushman & Wakefield