Contact Us
Slideshow

Q2 National Office Snapshot: 5 Things To Know

    Nationwide office fundamentals were strong in Q2 despite a marked slowdown in new job gains and a wave of new deliveries that came online during the quarter.

    “Even eight years into the cycle, office-using job creation remains healthy and solid in most markets. … However, we have blown past full employment in certain cities, which means job growth is going to slow in certain spots and accelerate in others as businesses broaden their search for talent,” Cushman & Wakefield Chief Economist Kevin Thorpe said in a statement. “This trend is becoming quite clear when we study this quarter’s office metrics. Secondary markets have a bit more labor slack and are now mostly powering the country’s absorption figures.”

    Next is a quick snapshot of the sector’s performance in Q2, according to research from commercial brokerages Cushman & Wakefield and JLL

    1 of 6

    Net Occupancy Rebounds

    National office absorption increased by 12.8M SF in Q2, according to Cushman & Wakefield. By that account, absorption — which is the net change in occupied space — rose 6.3M SF quarter-to-quarter, the highest jump since Q3 2016. Of the 85 markets tracked by C&W, 66 reported positive net absorption in Q2, while the other 19 reported declines. JLL reports positive net absorption was led by tech and co-working tenants, with Seattle leading every market in year-to-date net absorption of 2.9M SF.

    2 of 6

    Rents Up Year-To-Year

    Average office rents in the U.S. across all property types averaged $30.36/SF in Q2, according to C&W. This represents a 4.4% increase in rents compared to the year-ago quarter, though rent appreciation is still slower than the 6.1% growth registered in mid-2016, C&W reports. 

    The top 10 markets for year-over-year rent growth are: Oakland/East Bay (+16.1%), Palm Beach (+12.7%), Orange County, California (+12.5%), Boston (+12.4%), St. Petersburg, Florida (+10.7%), Nashville (+9.9%), Los Angeles (+9.4%), Austin (+8.7%), Jacksonville (+8.6%) and Baltimore (+8.3%).

    3 of 6

    Secondary Markets Lead Class-A Rent Jump

    Overall Class-A asking rents were up 3.7%, JLL reports, to an average $54.98/SF. Secondary markets with large tech hubs, including East Bay/Oakland, Austin and Nashville experienced the biggest jump in Class-A asking rents in Q2. JLL reports rents for newly delivered office space represent a 41.2% premium on the existing, broader Class-A average. 

    4 of 6

    New Supply Completions Reach 8-Year High

    Construction, construction workers

    Cushman & Wakefield said construction activity in Q2 was strong, with the most completions of new office space since Q2 2009. There were roughly 16M SF of new office deliveries across the U.S. in Q2, C&W reports, estimating a total 71M SF of new office space will be completed this year. 

    5 of 6

    Slight Bump In Vacancy Rates

    Robust construction and new deliveries pushed vacancies up slightly in Q2. JLL reports vacancies jumped for the third consecutive quarter to 14.8%, particularly in Class-B assets across different geographies as tenants moved to new, Class-A supply.