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Major Office and Industrial Markets Continued to Recover in Q4 2013

Los Angeles — December 23, 2013 — Office vacancy rates continued to decline in most major U.S. markets during Q4 2013, based on preliminary data from CBRE Group, Inc. Nine of the 13 largest markets showed lower office vacancy, and 11 of the 13 markets saw higher average asking rents. The U.S. industrial market also continued to show improvement in Q4 2013, according to CBRE, as eight of the 12 largest industrial markets had lower vacancy, fueled by demand from third party logistic companies, the food service sector, home construction and manufacturing.

“The steady recovery of the U.S. office market continues. As economic activity improves,  investors have had an opportunity to increase rents in most markets. The U.S. industrial market offers particular opportunity for investors seeking to capitalize on improving international trade and a resilient domestic consumer,” said Brook Scott, CBRE’s Interim Head of Research, Americas.

Office
Demand from technology companies led to a 50 basis point (bps) decline in vacancy rates in both San Francisco and Seattle, which reported 8.7% and 15.2% vacancy rates, respectively. A lack of new construction, combined with more office-using employment, contributed to 50 bps vacancy declines in Phoenix and Atlanta. Average office asking rents increased in 11 of the 13 U.S. metro office markets, and concessions have held steady overall. San Francisco led the country with a 3.0% increase in average asking rents, followed by Boston with a 2.5% increase, as space options diminished in both markets. Houston and Washington, D.C. reported significant deliveries during the quarter, at nearly 0.8 million sq. ft. and 1.5 million sq. ft., respectively.

 

Q4 2013 Preliminary Office Stats
 
 
 
Market
Q4 2013 Prelim
Vacancy Rate
(%)
Q3 2013 Final Vacancy Rate
(%)
BPS Change
Q4 2013 Prelim Gross Asking Rent ($)
Q3 2013 Final Gross Asking Rent ($)
% Change
Metro
 
 
 
 
 
 
Atlanta
20.9
21.4
-50
20.38
20.39
0.0
Boston
13.0
12.8
20
32.11
31.34
2.5
Chicago
17.4
17.5
-10
26.95
26.90
0.2
Dallas
18.0
18.2
-20
19.85
19.67
0.9
Denver
14.0
14.3
-30
22.10
21.81
1.3
Houston
11.8
12.1
-30
24.62
24.40
0.9
Los Angeles
16.6
16.6
0
31.22
31.22
0.0
Miami
16.6
17.4
-80
30.11
30.21
-0.3
New York
8.3
8.1
20
62.54
61.84
1.1
Phoenix
22.7
23.2
-50
20.53
20.41
0.6
San Francisco
8.7
9.2
-50
54.20
52.64
3.0
Seattle
15.2
15.7
-50
29.85
29.62
0.8
Washington, D.C.
14.5
14.4
10
35.41
35.24
0.5
Downtown
 
 
 
 
 
 
Atlanta
20.1
21.6
-150
22.87
22.83
0.2
Boston
8.4
8.4
0
46.72
45.81
2.0
Chicago
14.5
14.7
-20
33.46
33.26
0.6
Dallas
25.9
26.1
-20
19.92
19.27
3.4
Denver
13.0
12.7
30
29.83
29.41
1.4
Houston
9.2
9.1
10
36.02
35.03
2.8
Los Angeles
19.1
19.0
10
34.68
34.58
0.3
Miami
18.2
19.1
-90
33.35
33.58
-0.7
New York
N/A
N/A
N/A
N/A
N/A
N/A
Phoenix
23.8
24.1
-30
20.96
20.66
1.5
San Francisco
7.4
8.2
-80
55.45
53.84
3.0
Seattle
14.2
14.4
-20
33.36
33.00
1.1
Washington, D.C.
10.6
10.4
20
52.31
52.25
0.1
Suburban
 
 
 
 
 
 
Atlanta
21.4
21.2
20
19.01
18.87
0.7
Boston
17.2
16.3
90
19.77
19.59
0.9
Cambridge
7.4
6.5
90
47.72
47.66
0.1
Chicago
20.8
20.8
0
21.19
21.06
0.6
Dallas
16.9
17.0
-10
19.82
19.67
0.8
Denver
14.3
14.8
-50
19.90
19.62
1.4
Houston
12.5
13.0
-50
22.03
22.20
-0.8
Los Angeles
16.1
16.1
0
30.48
30.48
0.0
Maryland Suburban
16.5
16.6
-10
26.63
26.65
-0.1
Miami
15.8
16.6
-80
28.11
28.18
-0.2
Phoenix
22.3
22.9
-60
20.39
20.34
0.2
San Francisco
11.1
10.9
20
52.00
51.00
2.0
Seattle
15.8
16.7
-90
27.36
27.15
0.7
Virginia Northern
16.4
16.2
20
31.87
31.87
0.0
 
 
 
 
 
 
Source: CBRE Research, Q4 2013.
 
 
 

 

Industrial
The U.S. industrial market continued to improve in Q4 2013, with quarter-over-quarter availability* rates decreasing in eight of the 12 markets. The largest availability rate decline was in Dallas, with a 130 bps drop to 10.5%, followed by Atlanta, down 70 bps to 15.4%. Demand in Dallas was mainly from third party logistic companies and e-commerce related companies, and demand in Atlanta was driven by third party logistic companies, automotive suppliers, and housing-related companies.  These market improvements are consistent with recent signs of strengthening industrial production, reflected in higher automotive purchases and overall consumer spending. While industrial new construction activity has been low by historical standards throughout the recovery cycle, the improving fundamentals have sparked new construction activity in most of the major markets. In Houston, 3.4 million sq. ft. of new space was delivered in Q4 2013, and an additional 7.8 million sq. ft. is under construction.

Q4 2013 Preliminary Industrial Stats
 
 
 
Market
Q4 2013 Prelim
Availability Rate
(%)
Q3 2013 Final Availability Rate
(%)
BPS Change
Q4 2013 Prelim Net Asking Rent ($)
Q3 2013 Final Net Asking Rent ($)
% Change
Atlanta
15.4
16.1
-70
3.30
3.36
-1.8
Boston
19.4
19.4
0
6.59
6.56
0.5
Chicago
8.5
8.5
0
4.37
4.36
0.2
Dallas
10.5
11.8
-130
3.93
3.86
1.8
Denver
6.8
6.8
0
6.06
6.05
0.2
Houston
8.2
8.4
-20
6.48
6.48
0.0
Los Angeles
6.4
6.4
0
7.20
7.20
0.0
Miami
7.8
8.1
-30
5.55
5.36
3.5
New Jersey Northern
9.6
9.7
-10
5.87
5.89
-0.3
Phoenix
13.8
14.0
-20
6.52
6.60
-1.2
San Jose
11.9
12.2
-30
13.02
12.83
1.5
Seattle
8.9
9.7
-80
6.70
6.64
0.9
 
 
 
 
 
 
Source: CBRE Research, Q4 2013.
 
 
 

 

Note to editors/journalists:  To speak with a CBRE expert please email robert.mcgrath@cbre.com

*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 services and investment firm (in terms of 2012 revenue).  The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.  

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