MIAMI—Tenant demand for office space slowed nationally in the first quarter. According to Cushman & Wakefield's latest report, a continued weakness in the oil patch and a pullback in the tech sector were the primary drivers.
Nevertheless, net absorption was strong enough to push occupancy levels higher in most markets. Rents also climbed.
This sobering news follows the strongest office demand statewide in nine years. Specifically, total US net office space absorption slowed by 59% in the first quarter compared to the previous quarter. The result: Only 9.7 million square feet of office space was absorbed nationally.
Kevin Thorpe, CushWake's Chief Economist, tells GlobeSt.com the slowdown mirrors the choppy performance of the US economy and was concentrated in certain markets. In particular, he says, financial market volatility to start 2016 weighed heavily on the tech sector in particular.
“For the first time in years, we saw the venture capital faucet tighten, and certain tech hubs such as Silicon Valley and Boston began to pull back,” Thorpe says. “The upshot is that conditions have stabilized after the first six weeks of the year, and US businesses continued to add jobs at a healthy pace. The US economy seems to be pulling out of this mini-Q1 slowdown, and given that job creation and consumer confidence have remained steadfast, we should see the office demand metrics pick up from here.”
Despite the deceleration, tenant demand for office space kept pace with new construction. The national office vacancy rate remained flat at 13.5% in the first quarter That's its tightest level since the third quarter of 2008.
So how does Miami's office market compare to the rest of the nation? In the first quarter of 2016 the top 10 strongest markets in terms of demand for office space were Dallas/Fort Worth, with 2.2 million square feet of absorption; Denver, with 909,000 square feet; Miami, with 907,000 square feet; Philadelphia, with 818,000 square feet; Phoenix, with 725,000 square feet; Charlotte, with 670,000 square feet; San Diego, with 623,000 square feet; Seattle, with 612,000 square feet; Austin, with 581,000 square feet; and Palm Beach with 518,000 square feet.
Meanwhile, US office rents increased 4.1% in the first quarter compared to a year-ago to $28.45. The construction pipeline continued to expand modestly. In the first quarter of 2016, there were 9.5 million square feet of new office buildings that delivered to the market and 95.1 million square feet under construction expected to deliver over the next two years. Both readings were down slightly from the first quarter of a year-ago.
So how does Miami's office market compare to the rest of the nation rent-wise? Midtown Manhattan still has the highest office rents in the US at $78.40 per square foot. The top 10 markets in terms of rent growth were San Jose, with 22.1% year-over-year rental appreciation; Dallas/Fort Worth, with 17.5%; San Mateo County, with 16.5%; San Diego, with 13.5%; San Francisco, with 12.4%; Miami, with 11.8%; Palm Beach, with 11.7%; Seattle, with 11.6%; Puget Sound-Eastside (formerly Bellevue), with 10.4%; and New York (Midtown South), with 8.4%.
“The majority of the space that came online five years ago has been absorbed,” Alan Kleber, executive managing director at JLL South Florida, tells GlobeSt.com. “We have enough inventory to meet our near-term needs, but we're going to reach a point over the next five years where demand for Class A space outpaces supply. There are a handful of small buildings delivering in the next three years, but savvy developers should be planning their next office projects now in anticipation of meeting demand for new space by 2020.”
Want to know how Millennials are impacting Miami's office market? Check out my recent column.
MIAMI—Tenant demand for office space slowed nationally in the first quarter. According to Cushman & Wakefield's latest report, a continued weakness in the oil patch and a pullback in the tech sector were the primary drivers.
Nevertheless, net absorption was strong enough to push occupancy levels higher in most markets. Rents also climbed.
This sobering news follows the strongest office demand statewide in nine years. Specifically, total US net office space absorption slowed by 59% in the first quarter compared to the previous quarter. The result: Only 9.7 million square feet of office space was absorbed nationally.
Kevin Thorpe, CushWake's Chief Economist, tells GlobeSt.com the slowdown mirrors the choppy performance of the US economy and was concentrated in certain markets. In particular, he says, financial market volatility to start 2016 weighed heavily on the tech sector in particular.
“For the first time in years, we saw the venture capital faucet tighten, and certain tech hubs such as Silicon Valley and Boston began to pull back,” Thorpe says. “The upshot is that conditions have stabilized after the first six weeks of the year, and US businesses continued to add jobs at a healthy pace. The US economy seems to be pulling out of this mini-Q1 slowdown, and given that job creation and consumer confidence have remained steadfast, we should see the office demand metrics pick up from here.”
Despite the deceleration, tenant demand for office space kept pace with new construction. The national office vacancy rate remained flat at 13.5% in the first quarter That's its tightest level since the third quarter of 2008.
So how does Miami's office market compare to the rest of the nation? In the first quarter of 2016 the top 10 strongest markets in terms of demand for office space were Dallas/Fort Worth, with 2.2 million square feet of absorption; Denver, with 909,000 square feet; Miami, with 907,000 square feet; Philadelphia, with 818,000 square feet; Phoenix, with 725,000 square feet; Charlotte, with 670,000 square feet; San Diego, with 623,000 square feet; Seattle, with 612,000 square feet; Austin, with 581,000 square feet; and Palm Beach with 518,000 square feet.
Meanwhile, US office rents increased 4.1% in the first quarter compared to a year-ago to $28.45. The construction pipeline continued to expand modestly. In the first quarter of 2016, there were 9.5 million square feet of new office buildings that delivered to the market and 95.1 million square feet under construction expected to deliver over the next two years. Both readings were down slightly from the first quarter of a year-ago.
So how does Miami's office market compare to the rest of the nation rent-wise? Midtown Manhattan still has the highest office rents in the US at $78.40 per square foot. The top 10 markets in terms of rent growth were San Jose, with 22.1% year-over-year rental appreciation; Dallas/Fort Worth, with 17.5%; San Mateo County, with 16.5%; San Diego, with 13.5%; San Francisco, with 12.4%; Miami, with 11.8%; Palm Beach, with 11.7%; Seattle, with 11.6%; Puget Sound-Eastside (formerly Bellevue), with 10.4%; and
“The majority of the space that came online five years ago has been absorbed,” Alan Kleber, executive managing director at JLL South Florida, tells GlobeSt.com. “We have enough inventory to meet our near-term needs, but we're going to reach a point over the next five years where demand for Class A space outpaces supply. There are a handful of small buildings delivering in the next three years, but savvy developers should be planning their next office projects now in anticipation of meeting demand for new space by 2020.”
Want to know how Millennials are impacting Miami's office market? Check out my recent column.
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