Monday, April 01, 2019

Reis: Office Vacancy Rate decreased in Q1 to 16.6%

by Calculated Risk on 4/01/2019 12:13:00 PM

Reis reported that the office vacancy rate was at 16.6% in Q1, down from 16.7% in Q4 2018. This is up from 16.5% in Q1 2018, and down from the cycle peak of 17.6%.

From Reis Economist Barbara Denham:

The office vacancy rate fell slightly in the quarter to 16.6% from 16.7% last quarter and 16.5% a year ago. The office vacancy rate had bottomed at 16.3% in Q1 2017.

The national average asking rent increased 0.4% in the first quarter while the effective rent, which nets out landlord concessions, increased 0.5% in the quarter. At $33.58 per square foot (asking) and $27.26 per square foot (effective), the average rents have increased 2.2% and 2.3%, respectively, from the first quarter of 2018.
In the tenth year of the expansion, the office market continues to move at a snail’s pace. That said, the widening gap between the stronger markets and weaker ones is particularly noteworthy and is otherwise obscured by the flat national numbers. The underlying data shows that tech firms are fueling much of the growth in the stronger office markets, particularly in west coast metros, parts of Texas and parts of the east coast.

With more construction underway in 2019, vacancy is expected to increase a bit more while rent growth should continue to stay below the rate of inflation.
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 16.6% in Q1.  The office vacancy rate had been mostly moving sideways at an elevated level.

Office vacancy data courtesy of Reis.