Monday, January 05, 2015

Reis: Office Vacancy Rate declined in Q4 to 16.7%

by Bill McBride on 1/05/2015 08:59:00 AM

Reis released their Q4 2014 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined in Q4 to 16.7% from 16.8% in Q3 2014. This is down from 16.9% in Q4 2013, and down from the cycle peak of 17.6%.

From Bloomberg: U.S. Office-Occupancy Gains Jump to a Seven-Year High

Occupied office space increased by a net 10.97 million square feet (1 million square meters) during the last three months of the year, the most since the third quarter of 2007, according to property-research firm Reis Inc. The measure, known as net absorption, jumped 28 percent in 2014 to 32.5 million square feet, also a seven-year high.
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The nationwide vacancy rate at the end of the year was 16.7 percent, the lowest since the third quarter of 2009 and down from 16.9 percent in 2013.
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“As long as we don’t get a random shock to the economy, and labor growth continues, vacancies should fall and rents should rise faster in 2015,” [Ryan Severino, Reis senior economist] said.
Office Vacancy Rate Click on graph for larger image.

This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

Reis reported the vacancy rate was at 16.7% in Q4, down from 16.9% in Q4 2014. The vacancy rate peaked in this cycle at 17.6% in Q3 and Q4 2010, and Q1 2011.

Net absorption is picking up, but there will not be a significant pickup in new construction until the vacancy rate falls much further.

Office vacancy data courtesy of Reis.