U.S. office vacancy rate still on the rise
Users vacated about 1.8 million square feet of office space in the second quarter, pushing the U.S. office vacancy rate to 17.4 percent, The Wall Street Journal reported.
That’s the highest level since 1993, according to New York-based research firm Reis Inc.
The increase in vacant space, though smaller than in previous quarters, may signal that businesses don’t have any significant near-term hiring plans, as major office users, such as big banks and corporations, have been slow to return to their pre-recession hiring levels.
“The fate of office properties will depend largely on how well the U.S. economy and labor markets fare amid what appears to be a recovery that comes in fits and starts,” said Ryan Severino, an economist with Reis.
Las Vegas, Phoenix and Detroit, which have shown signs of stabilizing with smaller vacancy-rate increases than in some previous quarters, each still have vacancy rates of around 25 percent while other markets appear to be rebounding.
Washington, D.C., had the lowest vacancy rate – 10 percent – among the cities tracked by Reis, due in part to the expansion of the federal government. The Securities and Exchange Commission recently leased 200,000 square feet in the area and is considering taking more.
In New York City, which is the nation’s largest office market, the vacancy rate stabilized at 11.7 percent, the second-lowest rate among cities tracked by Reis.
The rebound in that market, the Journal reported, is due partly to an uptick in leasing activity by nonprofits that are taking advantage of falling rents, as well as the expansion of boutique financial service firms, some of which were founded by refugees from the banking crisis.
“These pops of growth from atypical office industries are eventually going to wean out,” said John Sikaitis, director of office research in the Americas for Jones Lang LaSalle Inc. “Then it’s going to be left on the shoulders of the typical office industries to start expanding.”
Across the 82 metropolitan areas tracked by Reis, tenants have vacated more than 130 million square feet of office space since early 2008.
To find information on the 10 metropolitan areas with the highest vacancy rates in the second quarter, click here.