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U.S. Commercial Real Estate Vacancies Increase at Midyear
14 Aug, 2008, New York, NY
National office vacancy rate for U.S. central business districts rises year-over-year to 10.2 percent from 9.7 percent. Overall average asking rents continue to rise despite slowdown in leasing activity.
Cushman & Wakefield today released second quarter statistics for the U.S. commercial real estate market showing the overall office vacancy rate for central business districts in the United States has increased to 10.2 percent from 9.7 percent at this time last year.
The rise in vacancy coincides with a decrease in office leasing activity in the first half of 2008. Year-to-date central business district leasing activity totaled 37 million square feet at the end of June, 7 million square feet less than at this time last year.
Despite the decline in national leasing activity, the overall average asking rent for central business districts reached $40.19 per square foot, up more than $9.00 from this time last year. New York and Boston had the highest average asking rents in the U.S. market. Midtown Manhattan, which has the highest rents in the nation, reached $83.96 per square foot, and Boston rose to $50.09 per square foot.
Cities in Florida and California had the highest change in vacancy. Orange County had a 7.4 percentage point increase and Fort Lauderdale rose 5.8 percentage points. Silicon Valley, at 16.9 percent, had the biggest decrease in vacancy, 5.6 percentage points lower than this time last year.
Manhattan’s Midtown South had the lowest overall vacancy rate in the nation, with 5.9 percent, which is 2.4 percentage points higher than this time last year. The top five cities with the lowest vacancy rates in the nation remain unchanged from last quarter: Midtown, Manhattan; Boston, Bellevue, Wash.; New Haven, Conn.; and Washington, D.C.
According to Maria Sicola, executive managing director and head of Research for Cushman & Wakefield, “We’ve seen a slight slowdown in office leasing activity, but fundamentals remain strong across most major markets, due in large part to limited supply – both new construction and sublease space.”
Largest Market Summaries
New York City: The New York City office market had the most leasing activity through midyear, although vacancy rates increased. Average asking rents were up $14.88 from this time last year. Midtown Manhattan overall average asking rents reached $83.96 per square foot, the highest in the nation. Midtown, Midtown South and Downtown recorded negative absorption, meaning more space was added to the market as available space than was removed from the market through leasing. Construction completions totaled 2.1 million square feet year to date, the highest in the nation.
Chicago: The Chicago central business district was among the two largest markets that recorded a vacancy rate decline. This quarter had a 12.1 percent vacancy rate, almost 2.0 percentage points lower than last year’s rate. Construction this year in Chicago was up as well, with 413,631 square feet completed year-to-date, compared to no construction completions last year. Investment sales activity year-to-date is second in the nation, totaling 3 million square feet and behind only Philadelphia, which recorded a total sales volume of 3.9 million square feet.
Washington D.C.: The District of Columbia office market recorded a 7.7 percent vacancy rate, 0.7 percentage points higher than this time last year. Class-A direct rental rates reached $54.80 per square foot, ranking third in the nation. Overall Class-A vacancy rates jumped to 10 percent, from 7.8 percent at this time last year. Leasing activity was third in the nation with 3.3 million square feet leased. Construction completions totaled 871,516 square feet, trailing only New York City.
Boston: With a 6.6 percent vacancy rate, Boston has the second-lowest vacancy rate in the nation, down from 8.9 percent at this time last year. Overall average asking rents reached $50.09 per square foot, the second highest in the nation. Leasing activity year to date totaled 2.4 million square feet, on par with last year’s volume and the fourth highest in the nation.
San Francisco: The San Francisco overall office market vacancy declined to 8.8 percent, down from 9.5 percent last year and the seventh lowest in the nation. Class-A vacancy rates decreased a full percentage point from this time last year to 8.0 percent. Average overall asking rents reached $48.82, and direct Class-A average asking rents reached $53.97.
Cities with the Lowest Overall Vacancy Rate
| 2Q 2008 | 2Q2007 | |
| Midtown South Manhattan NY | 5.9% | 3.5% |
| Boston, MA | 6.6% | 8.9% |
| Bellevue, WA | 7.1% | 3.8% |
| Midtown Manhattan NY | 7.1% | 5.3% |
| Washington, D.C. | 7.7% | 6.9% |
| Downtown Manhattan NY | 7.7% | 6.7% |
| New Haven, CT | 7.7% | 8.6% |
| Seattle, WA | 8.3% | 9.3% |
| San Francisco, CA | 8.8% | 9.5% |
| Portland, OR | 9.1% | 9.5% |
| National Average | 10.2% | 9.7% |
Highest Overall Average Asking Rents
| 2Q 2008 | 2Q 2007 | |
| Midtown Manhattan NY | $83.96 | $69.08 |
| Midtown South Manhattan NY | $53.22 | $42.31 |
| Downtown Manhattan NY | $50.74 | $44.48 |
| Boston, MA | $50.09 | $39.46 |
| Washington, D.C. | $49.42 | $46.41 |
| San Francisco, CA | $48.82 | $41.43 |
| Fairfield County CT | $45.05 | $38.23 |
| Palm Beach, FL | $41.69 | $37.19 |
| Bellevue, WA | $37.44 | $32.67 |
| Los Angeles, CA | $37.06 | $31.88 |
| National Average | $40.19 | $30.84 |
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Cushman & Wakefield is the world's largest privately-held commercial real estate services firm. Founded in 1917, it has 221 offices in 58 countries and more than 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.
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