by Bill McBride on 10/03/2016 11:31:00 AM
Monday, October 03, 2016
Reis released their Q3 2016 Office Vacancy survey this morning. Reis reported that the office vacancy rate declined to 16.0% in Q3, unchanged from 16.0% in Q2. This is down from 16.4% in Q3 2015, and down from the cycle peak of 17.6%.
From Reis Senior Economist and Director of Research Ryan Severino:
The national vacancy rate was unchanged in the third quarter at 16.0%. It had fallen for the eight previous quarters. While one quarter does not make for a trend, the year's overall performance has been lackluster. Vacancy has fallen only 20 basis points year to date, in 2015 the vacancy rate fell 40 basis points. ...Click on graph for larger image.
For the third consecutive quarter, the absolute levels of construction and absorption declined. While any pullback in a given quarter should not be viewed with alarm, the second consecutive quarterly deceleration was a bit surprising, particularly on the demand side. Once again, new supply exceeded net absorption this quarter which was unexpected. Only conversion activity prevented the national vacancy rate from increasing during the quarter. Net absorption had been outpacing new construction so consistently over the last two years that this second quarter of a reverse in this trend – new supply exceeding net absorption – was somewhat concerning.
Both asking and effective rents growth decelerated to 0.3% and 0.4%, respectively from 0.6% growth (for both) in the previous quarter, the twenty-third consecutive quarter of asking and effective rent growth. The 12-month changes for asking and effective rent growth both also slowed slightly versus the figures from the last two quarters.
This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).
Reis reported the vacancy rate was at 16.0% in Q3. The office vacancy rate is remains elevated.
Office vacancy data courtesy of Reis.