HERNDON, VA—The outlook for growth in office-using employment, and thus net absorption of office space, is continuing to brighten, according to the latest semi-annual forecast from the NAIOP Research Foundation. The forecast's authors, Dr. Hany Guirguis, Manhattan College, and Dr. Joshua Harris, University of Central Florida, are predicting absorption of 39.7 million square feet across the US this year. At about 10 million square feet per quarter, the tally is similar to the 41.4 million square feet actually absorbed in 2016.

The current model forecasts a slight decline, to 37.1 million square feet, of positive net absorption in 2018. However, that outlook is based on fourth quarter '16 data reflecting uncertainty before and after the election. As the Trump administration's political agenda takes shape, the forecast is likely be revised.

In fact, the study notes, Q4 absorption proved to be far stronger than forecast, with 14.8 million square feet absorbed, compared to the 7.8 million square feet that was forecast. The NAIOP forecast chalks this up to greater-than-expected hiring in the office-using sectors of the economy.

Furthermore, Bureau of Labor Statistics data put growth in office-using employment significantly ahead of growth in all of the non-farm employment categories. The forecast notes continued high confidence among CEOs and consumers alike, suggesting that most market participants are still anticipating growth.

Continued office-using growth at this pace naturally would lead to rapid expansion of the need for office space and thus an acceleration of absorption. However, NAIOP points to prior experience suggesting that growth in the number of office-using jobs is likely to come down as it moves closer to the overall employment growth average over the long term. Also driving the current forecast are expectations of higher short- and long-term interest rates, which would lead to a slight moderation in predicted net absorption next year.

“The US office market experienced a healthy Q1 2017, and the office sector is well-positioned for expansion as we continue to see robust growth,” says Thomas J. Bisacquino, president and CEO of NAIOP. “However, the binding constraint to robust net absorption may end up being available space, as more and more markets are short on vacant, high-quality office space for tenants with immediate needs.”

Instant Insights /

Forecast Brightens for Office Absorption

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