NEW YORK CITY—Rent growth continued in the first quarter for most of the nation's top 10 office markets, but the pace is slowing, Colliers International said Thursday. The firm expects the slowdown to continue as we reach full maturity on the current cycle, notably in markets that are seeing a great deal of speculative construction.

Moving from the general to the specific, Q1 performance varied from market to market. In Washington, DC, for example, asking rents are rising due to the influx of new product, but Colliers also expects fundamentals to be pressured by the ramp-up of spec development in the District and its metro area. All but one of the DC market's 10 largest Q1 leases involved a reduction in occupied space, while six of the 10 largest in Manhattan saw tenants taking new space.

That being said, DC was among a handful of the top 10 markets that didn't see a vacancy increase during Q1. Colliers reports upticks in vacancy for Houston, Los Angeles, Atlanta, San Francisco, Dallas, Boston and Seattle. DC's vacancies declined, while those of Manhattan and Chicago held steady at 6.5% and 11.4%, respectively.

The three West Coast markets in that lineup are seeing an increase in speculative supply that will likely suppress rents and cause vacancy to rise. “However, there is still lead-in time for some projects to pre-lease,” according to Colliers' Q1 report.

Colliers says tech firms continue to be a significant driver of office leasing activity and market shifts—and not only in San Francisco and Seattle. For example, the report says, “tech demand is fueling Boston's class B space and conversions to outperform prestigious class A towers.” And one of Manhattan's biggest leasing deals during the quarter was inked by music-streaming giant Spotify, which committed to 378,243 square feet at 4 World Trade Center.

Instant Insights /

Office Rent Growth Slows in Key Markets

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