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Commercial Office Vacancy on the Rise
Vacant office space in the United States increased by 13 percent in the fourth quarter of 2017, according to the latest analysis from CBRE. For the year, vacancy inched up 10 basis points (bps) during the fourth quarter of 2017, marking the first year-over-year increase in vacancy since 2010.
The vacancy rate in suburban markets increased 10 bps, to 14.2 percent and downtown vacancy ticked up 10 bps to 10.7 percent. Vacancy continued to fall in a majority of U.S. office markets, and the national office vacancy rate remains near its post-recession low.
The largest metro-area declines were recorded in Riverside (-80 bps), Salt Lake City (-70 bps) and Richmond (-60 bps). Tucson, Wilmington, Louisville, and Indianapolis, each declined by 60 bps or more. In the past four quarters, the vacancy tightening has been found in mid-sized markets located predominately across the Sun Belt, including Tucson, Las Vegas, Richmond, Albuquerque, Louisville, Orlando, Wilmington, Tampa, Phoenix, Kansas City, Riverside, Detroit and Jacksonville. The nation’s lowest vacancy rates list in Q4 2017 were led by tech markets: Seattle (7.6 percent), San Francisco (7.8 percent), Austin (8.2 percent), Raleigh (8.3 percent), New York (9.4 percent), and Boston (9.8 percent).
“The fourth quarter’s slight office vacancy rise can be attributed to an increase of supply and a slight loosening in the tightness of the market as we have closed in on the previous cyclical low,” says Spencer Levy, Americas’ head of research for CBRE. “Despite the slight rise in vacancy, we see the new supply as healthy overall, as many markets were becoming space constrained, in particular for large block space.”