WASHINGTON, D.C.- The push for efficiency continues to flatten demand for office space across the country, according to research released this week by commercial real estate provider Cassidy Turley.
In the first quarter of 2013, the U.S. office markets only absorbed 3-million-square-feet of space, the weakest rate since 2010 and a big drop from the previous quarter, when they absorbed 23 million, Cassidy Turley researchers found. Vacancy rates remained flat at 15.4% but still about 200 bps higher than pre-crisis levels.
“Market fundamentals continue to improve, but at the same time, the office sector is clearly going through a transformation,” said Kevin Thorpe, the chief economist at Cassidy Turley. “Many businesses are reassessing space needs and recognizing they can function perfectly well with a smaller, more efficient footprint. As a result, job growth is not giving us the same pop in demand that we have grown accustomed to.”
Earlier this year, in its final report on the office sector’s performance in 2012, Cassidy Turley cited a survey conducted by CoreNet Global that stated “the amount of office space per worker has declined from 225 sf prior to the recession to 176 sf in 2012. It is estimated that it could decrease to as low as 151 sf by 2017.”
Other researchers believe companies won’t make such drastic reductions. A recent CBRE report, “13 Trends for 2013,” states that between 2013 and 2014, the average amount allocated to each worker will decline slightly but remain above 210-square-feet.
Cassidy Turley also found that “new office construction increased from 41.8 msf in the fourth quarter to 48.9 msf in the first quarter of 2013.”
“The development pipeline remains lean,” Thorpe said. “Even with a slight pickup this quarter, new supply coming to the market is still 30% below the norm. The supply constraints are critically important for restoring balance to the office sector.”
The firm’s will make the complete first quarter office market report available April 15 on their website.