Tuesday, October 01, 2019

Reis: Office Vacancy Rate unchanged in Q3 at 16.8%

by Calculated Risk on 10/01/2019 01:48:00 PM

Reis reported that the office vacancy rate was at 16.8% in Q3, unchanged from 16.8% in Q2 2019. This is up from 16.7% in Q3 2018, and down from the cycle peak of 17.6%.

From Reis Senior Economist Barbara Byrne Denham:

The Office vacancy rate was flat in the quarter at 16.8%. In the third quarter of 2018 it was 16.7%. Overall vacancy has declined only 0.3% in last five years.

Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.6% in the third quarter. At $34.06 per square foot (asking) and $27.65 per square foot (effective), the average rents have increased 2.6% from the third quarter of 2018.
Office occupancy growth has been sluggish throughout this expansion as firms lease far fewer square feet per added job. Rent growth has also disappointed owners. Each quarter seems to bring more cautiousness as firms weather continued uncertainty from the trade war and global economy. Still, the U.S. has added 350,000 office jobs this year through August, down from 470,000 office jobs added in the first eight months of 2018, but further evidence of steady growth. This should keep office occupancy growth positive. Indeed, the news on the office market has not generated headlines, but growth remains positive and should remain positive this year and next.
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 16.8% in Q3.  The office vacancy rate had been mostly moving sideways at an elevated level, but has increased over the last two years.

Office vacancy data courtesy of Reis.