office building exterior

Written by

Office Vacancy Across Top U.S. Markets Dipped Below 15%, National Leasing Rates Stable

| Featured, Market Reports, National, Office| Views: 0

As we approach the conclusion of the second year of the pandemic, most return-to-office deadlines remain rather fickle. And, while it’s still uncertain how long it will be until the post-pandemic world settles into its new normal rhythm, activity across the top U.S. office markets indicates a sense of optimism due to increasing vaccination rates and declining new case trends in much of the country.

In fact, the most recent monthly office report released by CommercialEdge found that office vacancy in major markets is, once again, on a downward trend, dipping to 14.9% in September. Specifically, the data analyzed showed a decrease of 50 basis points (bps) compared to the previous month, while still 130 bps higher year-over-year (Y-o-Y). However, CommercialEdge analysts also noted that the largest 12-month increases in vacancy were recorded in markets where new supply had been delivered in significant amounts.

For instance, Austin — one of the most attractive U.S. cities in recent years — has seen its office vacancy increase 510 bps during the last 12 months. However, developers here have maintained a rather generous local pipeline that has yielded 15% of stock since 2017. An additional 10% of stock was under construction at the close of September. And, with 8.7 million square feet of new Austin office space in development, the city is currently home to the third-largest under-construction pipeline, behind only Manhattan (with nearly 21 million square feet under construction) and Boston (13.3 million square feet).

Similarly, average vacancy for office space in San Francisco was up 510 bps Y-o-Y in September. Here, too, data shows a sizeable pipeline yield — 11.2% of stock delivered since 2017. And, as of the end of last month, under-construction projects in the city amounted to nearly 6.5 million square feet (4.1% of stock).

Meanwhile, the average full-service equivalent listing rate rested at $38.62 per square foot across the top markets surveyed for the report. Although this was $0.10 lower month-over-month, it did mark a 1.2% increase compared to September 2020. On an individual market level, the three largest rate increases were recorded in California and Florida markets. Specifically, Los Angeles office space for rent listed for an average of $41.62 per square foot last month — an increase of 8.1% Y-o-Y, which was the largest asking rate growth among the markets analyzed.

In second place with a 12-month increase of 6.2% each were the Bay Area — where rents averaged $55.79 per square foot in September — and Tampa ($29.70 per square foot). Meanwhile, average listing rates in Miami rested at $43.43 per square foot, which was 5.8% higher than the previous year, for the third-highest rate increase on the list.

For more details on how top markets fared during the first nine months of the year, visit the CommercialEdge blog to check out the most recent U.S. office rents report, as well as investment analysis, pipeline data, and insights on economic recovery and recent trends in industry fundamentals.

Comments are closed.