by Shane Henson — July 17, 2013—Office vacancy rates declined in most major U.S. markets during the second quarter (Q2) of 2013, according to preliminary data from CBRE Group, a global commercial real estate services and investment firm. Ten of the 13 largest markets showed declines in office vacancy, led by Boston and Houston. Industrial availability continued to decrease in major U.S. markets as well, according to CBRE.
“Continued job growth and minimal new office development is leading to tighter conditions in most major U.S. office markets,” explains Brook Scott, CBRE’s interim head of research, Americas. “Stronger consumer confidence and a resurgent housing market are helping to strengthen industrial markets, but the sector still faces headwinds from a slowdown in economic activity outside the United States.”
In the major U.S. office markets tracked by CBRE, Boston and Houston recorded the biggest drops in vacancy during Q2 2013, both decreasing 50 basis points (bps), driven by the technology and healthcare sectors in Boston and by the energy sector in Houston. Washington, DC, was the only major market to register an increase in vacancy, at 20 bps, with decreased activity by the federal government continuing to weigh on the market. Vacancy levels were unchanged in New York and Los Angeles, but decreased in the other major markets. Rental rates continued to trend higher and concessions remained stable in most markets due to moderate job growth.
Per CBRE’s findings, during Q2 2013, availability rates for most major U.S. industrial markets continued to decrease. At 100 bps, Miami had the largest decrease in availability rates compared with Q1 2013 as improvements to Port Miami attracted a number of large tenants. Atlanta had the second-biggest decrease, with a 50 bps decline, benefitting from its prominence as a distribution hub in the Southeast. Three of the twelve major markets—Los Angeles (up 50 bps), Phoenix (up 40 bps) and Northern New Jersey (up 20 bps)—saw availability increase during this period.
During Q2 2013, rents and tenant concessions remained steady, with the exception of a few markets, including Dallas, Denver, Boston and Chicago, where rents are increasing due to diminished availability, particularly for Class A space. Demand for warehouse and distribution space remained high. Most construction activity, particularly for requirements greater than 500,000 square feet, remains built-to-suit for a particular tenant’s needs. However, speculative construction for new, multitenanted buildings is also on the rise, says CBRE.
