by Shane Henson — January 27, 2014—The U.S. commercial real estate sector had a strong finish to 2013 with continued recovery in the fourth quarter (Q4 2013), according to the latest analysis from global commercial real estate services and investment firm CBRE Group.
The office vacancy rate declined by 30 basis points (bps) to reach 14.8% in Q4 2013. This was the sharpest fall in six quarters, says CBRE. For all of 2013, the vacancy rate declined by 60 bps, the best annual performance since 2006.
CBRE also found that vacancy improvement continues to be broad-based within the office market sector, with a majority of markets seeing declines over the previous quarter. Rates fell in 44 of the 63 U.S. office markets tracked, rose in 15, and remained unchanged in four. The suburban vacancy rate fell for the seventh consecutive quarter—by 20 bps, to 16.3%—while the downtown rate fell by 10 bps, to 12.3%.
As with previous quarters, there were signs of an expanding recovery nationally as small markets were among the best performers in the fourth quarter: Wilmington, Nashville, and Trenton’s vacancy rates fell by 310, 160 and 130 bps, respectively, to 17.6%, 10.4% and 11%. Also among the best performers were markets with a strong presence of technology firms like San Jose and Boston, whose vacancy rates fell by 90 and 80 bps, respectively, to 13.9% and 11.2%.
“While the annual 60 bps decline in the office vacancy rate was impressive given the headwinds facing the U.S. economy, at 14.8%, the vacancy rate remains elevated compared with pre-recessionary levels,” noted Jon Southard, managing director of CBRE’s Econometric Advisors group. “We expect office demand to strengthen appreciably in 2014 given that office-using payrolls have already surpassed their previous peak and employment growth has improved in recent months despite the government shutdown. Led by the private sector, employment gains of 193,000 on average over three months are a good sign for future commercial real estate demand.”
