Boston,
April 9, 2012 – The U.S. office vacancy rate remained unchanged in
the first quarter (Q1) of 2012 at 16%, according to the latest analysis from
CBRE Econometric Advisors (CBRE-EA).
The national industrial availability1
rate dropped 20 basis
points (bps) during Q1 2012 to 13.4%, continuing a pattern of
improvement that goes back nearly two years.
In Q1 2012, the retail availability rate remained
flat at 13.1%, according to CBRE-EA.
Apartment demand continued to accelerate, with the
vacancy rate declining to 5.1% in Q1 2012, a 90 bps drop from a year ago and
the best improvement since Q1 2010.
“The
most important economic news in Q1 2012 was the pick-up in hiring, but so far we
have only seen strong improvement in the multi-family sector,” said Jon
Southard, Managing Director, CBRE-EA. “For property types with longer leases,
the employment gains served mostly to fill in “shadow vacancy” -- space that was
previously leased but not used. The
delay between stronger employment and a pick-up in leasing demand is typical
for the early stages of recovery in the office, industrial, and retail
sectors.”
Office Market
At 16%
in Q1 2012, the national vacancy rate remains well above the pre-recession low
of 12.4%. The office market continues to
face headwinds from global financial market uncertainty, regulatory and fiscal
uncertainty and, in certain local markets, a sluggish housing recovery. These
headwinds have been counter-balanced by impressive growth in professional and
business service jobs as well as contained new construction pipelines, enabling
continued but slow improvement in market fundamentals.
During
Q1 2012, suburban submarkets continued to out-perform downtown submarkets. Aggregate
vacancy in the suburbs remained unchanged while the national downtown vacancy
rate rose by 10 bps. A market-by-market analysis shows that occupancy improved
in just under half the markets nationwide. Markets with technology or energy
exposure continued to be among the best performers as vacancy rates fell by 70
bps in both Oakland and Seattle, by 60
bps in Houston and by 40 bps in Oklahoma City.
“The job market will need to approach its
pre-recession form before more rapid improvement in the office market can take
hold,” Mr. Southard said. “We continue to anticipate more robust hiring during
the second half of 2012, which will move us closer to that goal.”
Industrial
Market
The first quarter’s decline in availability, to
13.4%, extends a streak of falling availability rates to seven consecutive
quarters. During the quarter, 35 markets reported lower availability rates and
25 reported increases. Among larger markets, Seattle was the leader
dropping by 100 bps, followed by Edison (NJ) and Fort Worth both down by 80
bps, and Atlanta, Cleveland, and Dallas all down 70 bps. With many markets reporting improvement in
their availability rates, economic growth appears to be continuing to lead to
increased industrial space demand. Some larger markets did report weakness,
however, including, Riverside, Philadelphia, Phoenix, and Kansas City.
Retail Market
Q1
2012 retail availability was flat compared to the prior quarter at 13.1%.
Even
though construction completions were at historically low levels in the first
quarter, absorption gains were not enough to warrant any movement from year-end
availability rates.
A
majority of the retail markets recorded either flat or declining availability
rates, compared with Q4 2011. Notable
performers included Birmingham, Austin, Miami, Kansas City and Indianapolis;
each of these markets recorded a decline of over 50 bps. On the other end of the spectrum, markets
such as Jacksonville, Washington DC and San Diego recorded gains in
availability rates of over 50 bps in the first quarter. However, most markets
are still hovering above their early 2011 availability rates.
Apartment Market
Compared
to a year ago, apartment vacancy rates declined in 58 out of 63 markets, with
the biggest year-over-year declines in vacancy (150 bps or more) in Birmingham,
Dayton, Greenville, Phoenix, Tulsa, Houston, Detroit, Richmond, Salt Lake City,
Fort Worth, and Norfolk. Markets
with the lowest (4 percent or less) vacancy rates include Newark, Pittsburgh,
San Jose, Oakland, Minneapolis, Providence, Salt Lake City, Boston, Hartford, Los
Angeles, Edison (NJ), Miami, Portland (OR), Columbus, San Francisco, Ventura,
and Detroit. With the continuing gains in occupancy, effective rent growth has
momentum, with the national index rising at an annualized rate of about 4.5
percent.
1 Availability is
space that is actively being marketed and available for tenant build-out within
12 months.
About
CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company
headquartered in Los Angeles, is the world’s largest commercial real estate
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Please visit our Web site at www.cbre.com.