Recovery in US office markets slows
The office market recovery in the United States has slowed over the past three months, according to the third quarter 2011 report from Cushman & Wakefield.
The overall average vacancy rate for office space in US Central Business Districts remained unchanged from the middle of the year ending the third quarter at 13.8% but year on year the vacancy rate declined 1.1% from 14.9%.
Eighteen of the 30 US CBDs tracked by Cushman & Wakefield did chart quarterly declines in vacancy, though most not more than 1% with New Haven, Connecticut, Midtown South Manhattan and Boston among the markets with the most significant declines.
Year to date leasing activity totalled 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. 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,’ said Maria Sicola, executive managing director of Research for Cushman & Wakefield in the Americas.
Average asking rents for US CBDs increased for the second consecutive quarter to $36.80 per square foot, up $0.35 from the middle of the year. Average asking rents rose in 12 of the CBDs tracked, with San Francisco, Miami, Houston and Dallas recording the highest quarter on quarter increases, while average asking rents declined in 16 markets and remained unchanged in the remaining two.
Absorption totalled nine 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 on year increases in absorption.