U.S. Office Vacancy Rate Declines for First Time Since 2007
8 Jul, 2010, New York
Cushman & Wakefield today released midyear 2010 statistics for the U.S. office market that show the average vacancy rate for U.S. central business districts (CBDs) has declined for the first time since 2007.
The average U.S. CBD vacancy rate was 14.8 percent at midyear 2010, a 0.2 percentage point decrease from 15.0 percent at the end of the first quarter of 2010. The average vacancy rate for U.S. CBDs had been climbing steadily for nine quarters, since it bottomed in the fourth quarter of 2007 at 9.7 percent.
Of the 31 CBDs tracked by Cushman & Wakefield, 16 - or 52 percent - saw quarterly declines in vacancy during the second quarter, compared to 9 of 31 - or 29 percent - during the first quarter of 2010. The CBDs with the largest quarter-over-quarter declines in vacancy included Atlanta, which declined to 21.5 percent from 23.2 percent; Ft. Lauderdale, which declined to 18.9 percent from 20.4 percent; Phoenix, which declined to 22.0 percent from 23.4 percent; Oakland, Calif., which declined to 16.5 percent from 17.7 percent; and Midtown Manhattan, which declined to 11.5 percent from 12.6 percent.
"Markets throughout the U.S. continue to strengthen, as it becomes strongly apparent that the national vacancy rate for CBDs has peaked," said Maria Sicola, executive managing director and head of Americas Research for Cushman & Wakefield. "Increased leasing activity has attributed to declines in vacancy."
Year-to-date leasing activity in CBDs increased substantially during the second quarter of 2010. With 29 million square feet leased nationally year-to-date, activity was up 51.6 percent from the 19.1 million square feet leased at this time last year. Twenty-one of the CBDs tracked saw a year-over-year increase, among the most significant being Midtown South Manhattan (236 percent increase), Denver (126 percent increase), New Haven, Conn. (99 percent increase), Midtown Manhattan (96 percent increase) and Houston (93 percent increase).
The average U.S. CBD rental rate declined slightly from the end of the first quarter of 2010, down $0.39 - or 1 percent - to $36.49 per square foot at midyear 2010. While 19 of the 31 CBDs tracked by Cushman & Wakefield posted quarterly declines in rental rates, in 13 of the 19 the declines were less than 3 percent, a slowdown of the dramatic decreases seen in previous quarters.
"While there is still substantial competition among landlords to offer the best deal to prospective tenants, rental rates are nearing a bottom in several markets," said Ms. Sicola.
The year-to-date absorption rate, a measure which indicates the net change in occupied space, was negative 441,498 square feet at midyear 2010, a 98 percent increase in absorption from the negative 24.9 million square feet at midyear 2009.