NEW YORK CITY—The stronger growth trajectory of the US economy over the past year has resulted in a shift among the fastest-recovering office markets, says Cushman & Wakefield. The C&W report, under the authorship of Ken McCarthy, senior manging director, econonomic analysis and forecasting, finds that MSA growth patterns are more in line with historical norms than what we saw as the recovery began.

“During the recovery, economic growth has varied greatly across these US metropolitan areas,” according to the C&W report, which analyzed employment gains and office vacancy declines in the 39 largest office MSAs. “Some recovered quickly and continued to grow at a strong pace while many others lagged behind. As the recovery has been led by rising output in the technology sector and the boom in domestic energy production, many of the best performing MSAs have significant concentrations of employment in these sectors.”

That's still the case as we head into the fourth quarter of 2014. However, C&W's report says, “As the national economy has accelerated in the last year, a new set of MSAs has begun to grow more rapidly.”

Whereas Austin, TX led the way between 2010 and 2013 with annual job growth averaging 3.9%, today the fastest-growing MSA is Raleigh-Durham, NC, which saw 4.8% gains in employment between July '13 and July of this year. That same metro area figured in the tally of the fastest-growing MSAs for the three years prior, but at a slower pace, averaging 2.6% during those years.

“The acceleration in job growth across the nation is evident, with the overall pace of growth in the top 15 cities now stronger,” the report states. "In the 12 months to July 2014, the top 15 MSAs averaged a 3.1% increase in employment,” compared with 2.7% per year in between February '10 and July '13. Additionally, the number of SMSAs with annual employment growth of more than 3.0% has doubled to eight.

C&W notes that the composition of that top 15 has also changed, with one third of the top 15 turning over. “New York, San Antonio, Detroit, Seattle and San Jose have been replaced by Atlanta, San Diego, Portland, Jacksonville and the Inland Empire,” the report states. Other cities in the most recent top 15 ranking include Houston, Dallas, Austin, Denver, Orlando, Miami, San Francisco, Charlotte and Nashville.

The current top-15 list is “very close to that of the 1990 to 2008 period,” according to C&W. In fact, 13 of the top 15 MSAs for job growth over the past year were also in the top 15 during those 18 years.

“It does appear that as the job recovery has accelerated over the last year it has also broadened into more industries,” the report states. “As of July, manufacturing production was within 0.1% of the all-time high reached in 2007 just before the recession began. In addition, other segments of the economy, like construction and local government, are growing and hiring more aggressively.” It's a broadening of the base, C&W says, that has important implications for commercial real estate.

For CRE, the combination of stronger overall growth and spreading recovery means that “we are likely to see improvement in terms of declining vacancy rates and upward trending rents in more markets across the US during the coming year,” the report concludes. “This suggests that some of the best opportunities in commercial real estate over the next year or two are likely to be in metropolitan areas where economic performance has lagged. The markets that were slowest to recover have some of the best upside potential now.”

Instant Insights /

Recovery Grows 'More Balanced' Across Markets

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