Office Market Forecast Projects Rental Rate Appreciation, Major Increases in Absorption
31 Mar, 2011, New York
Cushman & Wakefield today released its U.S. Office Market Forecast for 2011- 2013, projecting rental rate appreciation, major increases in absorption and vacancy declines over the next two years for Central Business District (CBD) and suburban markets.
"Employment levels are projected to grow significantly over the next three years, generating a large increase in demand and momentum in the U.S. office market," said Maria Sicola, executive managing director and head of Americas Research for Cushman & Wakefield.
Vacancies are expected to decline in CBDs before the suburbs initially, though recovery should be more even by 2013, when the national CBD vacancy rate is predicted to hit the low 12.0 percent range.
While rental rates currently remain near bottom in most of the U.S., a lack of new supply and rising demand should increase rents for approximately half of CBDs this year, with nearly every market seeing rental rate increases by 2013. Those markets with relatively little - or no - new construction coming on line in the next three years will have the highest increases, including San Francisco, Midtown South Manhattan, Boston, Seattle, Salt Lake City and Washington, D.C.
Overall absorption is expected to improve steadily over the next few years, with Southwest markets including Houston, Dallas, Denver, Phoenix and Salt Lake City leading in occupancy gains relative to inventory.
New construction remains historically low, and when delivered over the next three years, will only grow suburban inventories by 0.5 percent. Projects under construction in still relatively strong markets are likely to be substantially pre-leased, and those underway in markets with still-high vacancy rates should not have an adverse impact, as most are build-to-suit.
With demand growing, rental rates in the suburban markets are expected to increase, though not at the double-digit levels seen in previous upturns. Almost half of suburban markets will still see year-over-year rent declines, but by 2013 only five will be below 2010 levels (Miami, Orange County, Detroit, Kansas City and New Haven).
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