Although the year began with volatility in the financial markets, strong employment numbers boosted optimism in office, Colliers International reports.
Markets continued to strengthen as national vacancy rates declined 10 basis points to 12.6% in Q1. Colliers projects those rates will continue to decline through Q2. Class-A asking rents remained strong in Q1 for both CBD and suburban areas, posting gains of 8.9% to $46.19/SF in CBDs and a 3.7% increase to $28.96/SF in suburbs.
As the end of Q2 nears, take a look at how the six largest office markets fared last quarter in CBD Class-A office space.
“We expect the expansion to continue through the next couple of years,” Colliers national director of research Michael Roessle says, "as several indicators point to renewed growth in Q2 and beyond."
Boston
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Vacancy Rate: 9.5%
Absorption: 45k SF
CBD Asking Rents: $57.68/SF
Boston vacancy rates dipped 0.3% to 9.5% compared to Q1 '15, while the city's metro areas accounted for $44.7M SF of Class-A inventory and asking rents increased 10% to $57.68/SF compared to the year-ago quarter.
Chicago
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Vacancy Rate: 10.7%
Absorption: 111k SF
CBD Asking Rents: $41.73/SF
Suburban vacancy rates reached 13.1% in the Midwest market, a 0.2% decline compared to the previous quarter. CBD Class-A markets fared even better in Q1 with a 0.3% decline to 10.7% vacancy.
Los Angeles
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Vacancy Rate: 16.7%
Absorption: 185k SF
CBD Asking Rents: $41.06/SF
Downtown LA experienced a 3.4% year-over-year rent change in Class-A office space to $41.06/SF in Q1, and as of March 31 the City of Angels accounted for 18M SF of inventory.
New York City
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Vacancy Rate: 11.4%
Absorption: -1.3M SF
CBD Asking Rents: $73.25/SF
With 336M SF in Class-A inventory downtown, NY asking rents increased 2.1% in Q1 compared to the previous quarter, while vacancy rates increased 0.1% As technical connectivity become a necessity in office markets, NYC is working to adapt.
San Francisco
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Vacancy Rate: 7.2%
Absorption: 871k SF
CBD Asking Rents: $59.65/SF
S.F. follows behind NYC with some of the highest rents in the nation, averaging $59.65/SF in CBD neighborhoods during Q1. A heavily-saturated tech sector has also impacted its suburban markets, where rents rose 4.4% to $43.23/SF compared to the year ago quarter.
Washington, DC
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Vacancy Rate: 12.1%
Absorption: -4,700 SF
CBD Asking Rents: $57.43/SF
Coming out of Q1, DC’s CBD office rents averaged $57.43/SF, a 2.4% increase compared to the same timeframe in 2015. The market accounted for 90.6M SF of inventory and a 0.6% increase in vacancy rates compared to the previous quarter.
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