Resurgent Demand Drives Office Vacancy to 18-Year Low
• Vibrant leasing activity in Q2 2019 lowered the overall office vacancy rate by 10 basis points (bps) to 12.2%— its lowest level in 18 years.
• Demand has increased for the past two years, culminating in 66.5 million sq. ft. of annual net absorption through Q2 2019—the strongest four quarters of demand since Q2 2007.
• New office completions rose to 14.7 million sq. ft. in Q2—the largest quarterly amount since Q3 2009. The four-quarter average of completions has stabilized since early 2018 after growing for several years.
• The average gross asking rent increased by 5.1% year-over-year in Q2 to $34.28 per sq. ft., continuing a pattern of accelerating rent growth.
• Downtown office markets saw sharply higher rents in Q2 compared with the prior year, but also more completions than suburban markets. The downtown vacancy rate remained stable at 10.4%.
• With continued strong demand and low levels of new construction, suburban office markets recorded a fifth consecutive quarterly decline in vacancy to 13.2%—the lowest level since 2001.
• Demand for office space was broadly consistent nationwide. Only nine out of 54 markets tracked by CBRE had negative net absorption in Q2. The strongest demand remains for markets with strong tech concentrations: San Jose, Boston, Austin and Seattle.