2017 Office Performance Slows, Net Leasing Activity Drops To 2012 Lows
In 2017, tenant expansions in the U.S. office market dipped to their lowest level since 2012, but limited new supply kept the market relatively stable.
A similar trajectory is expected for 2018. The general consensus regarding this year's office real estate performance is that growth will slow and fundamentals may plateau as accelerated construction puts upward pressure on absorption and vacancy rates, according to industry trends and predictions reported by Bisnow.
By the end of 2017, tenants occupied 21M SF more office space than at the beginning of the year. That number is down compared to 2016's 29M SF, the Wall Street Journal reports.
Though developers were slow to add new supply last year, effective rents were affected, rising only 1.8% by the end of the year. This number was sitting closer to 4% in 2015 and was at 12% before the financial crisis, The Real Deal reports.
Developers added another 37.6M SF of supply in 2017, and delivered 36.6M SF in 2016. This relative balance meant that the national vacancy rate remained the same in the fourth quarter of 2017 as it did in the second quarter, sitting around 16.3%, according to the WSJ.
Nationwide, New York experienced the lowest vacancy rate of 8.7% while Dayton, Ohio, registered the largest at 27%.