WASHINGTON, DC—In keeping with generally stronger labor markets, June's disappointing job numbers notwithstanding, tenant demand for office space muscled up during the second quarter, DTZ said Thursday. That in turn led to the best year-over-year increase in asking rents since the peak of the last cycle.

Office markets across the US absorbed an aggregate of 20.1 million square feet of space during Q2, up 15.3% from the year-ago period. Sixty-eight of the 80 metro areas tracked by DTZ reported occupancy gains during Q2, while 12 withstood losses. Vacancy declined 20 basis points to 14.2% from the previous quarter.

“Net absorption is solid and picking up steam, which links directly to office-using job growth and is the strongest it has been in the current cycle,” says chief economist Kevin Thorpe. Looking at the past four quarters, tenant growth is approaching an annualized 80 million square feet, “which puts us back in pre-recession territory.”

San Jose led the nation by far with 3.8 million square feet of demand during Q2, more than twice the tally recorded by second-ranked Dallas with 1.5 million square feet. Rounding out the top 10 were Oakland, with 1.4 million square feet; Los Angeles, 1.2 million square feet; Atlanta, 993,000 square feet; Phoenix, 850,000 square feet; Raleigh-Durham, 828,000 square feet; Philadelphia, 723,000 square feet; New York, 709,000 square feet; and Chicago, with 525,000 square feet.

Q2 saw 107.7 million square feet of new office product under construction, a 36% Y-O-Y increase. Even so, “Deliveries are only a fraction of what is being absorbed, and although we have more in the pipeline, we expect that the market will continue to tighten over the next two years,” says Thorpe.

That in turn bodes well for continued rent growth. As it is, Q2 saw rents up by 2.7% compared to the year-ago period, for the strongest quarterly gain since peaking in 2008. Office rents rose in 59 out of the 80 metros tracked.

“Rent growth trends are clearly spreading to more geographic areas and are being driven mostly by strong demand trends in the CBDs,” Thorpe says. Rental rates are on the rise “not only for high-quality class A space, but across the board” as well. Although suburban office is “still muddling through” in most regions, “the demand metrics in the CBDs are as robust as anything we have observed since the late 1990s.”

The top 10 strongest markets in terms of rent growth were San Francisco, with 13.8% Y-O-Y rental appreciation; Oakland, with 8.6%; Orange County, CA, with 8.4%;  San Mateo County, CA, with 8.1%; Nashville, with 7.6%; Denver, with 7.5%; San Diego, with 6.1%; Boston, with 5.9%; Charlotte, with 5.7%; and Houston, with 5.7%.