LOS ANGELES-Denver and San Francisco were the big winners in the Q1 space race, according to new research by CBRE. The first three months of the year were marked by mostly dipping or flat office vacancies. There was a variety of reasons for these market gains including, at long last, jobs, according to Asieh Mansour, CBRE’s Head of Americas Research.
“Although the economic rebound is tepid by historical standards, real estate markets are being helped by a dearth of new construction,” she says in the statement, “which allows excess space to be steadily absorbed. The consolidating federal government sector, however, does provide a drag on the recovery in certain markets.”
In a follow-up with GlobeSt.com, the San Francisco-based Mansour explains however that the emphasis on construction and the fed consolidation does not reflect poorly on the role of the private sector in the market’s performance. “The private sector of the US economy is very strong,” she tells GlobeSt.com, “and it is supporting demand-side property-market fundamentals.”
In fact, depending on the market, jobs do play a part in the improving picture. This is especially true in “the high-tech and energy oriented markets,” she says. Think San Francisco and Denver. “Other relatively stagnant markets continue to reel from the housing bust, the decline in vacancy more a function of the dearth in supply.”
Big winner Denver posted a 14.5% Q1 vacancy, a 60-basis-point drop from Q4. San Francisco, with its 9.1% vacancy, had the second largest (40 bps) drop. Both markets enjoyed a bump in asking rates as a result.
The lowest Q1 vacancy belongs to New York City at 7.6%, but ironically, as Mansour points out, compared to its Q4 7.3%, it represents one of the highest basis point jumps, at 30. But Washington, DC was the winner of that dubious prize, with a 40-bp jump from 13.8 to 14.2.
These two gateway cities are feeling the pinch of their particular market focus. “Decreased activity by the federal government and a cautious financial-services sector continue to weigh on these markets,” she says.
CBRE tracks the same essential dynamics for the industrial sector, with Boston and Miami both sharing the biggest (60-bp) gain. “Large blocks of contiguous warehouse/distribution space in key port markets and super-regional centers are in demand,” she says. “Consolidation of the logistics firms and ecommerce trends are the key drivers of the bulk warehouse distribution space.” Q1′s lowest industrial vacancy went to Miami at 7.1%.