Vacancies: Top 5 Worst Office Cities in the Country
A nationwide tech surge is driving office rents north, with prices expected to jump another 3.4% this year. Unsurprisingly, major cities like New York City, Washington, DC, and San Francisco see the lowest office vacancy rates with some markets in single digits. In secondary markets, however, landlords are finding it difficult to fill office space. Here are the five worst office cities in the country.
Vacancy rate: 20.1%
The Valley of the Sun has high-tech job growth, ranking as high as premier tech hub San Francisco; however, it has shockingly high office vacancy rates as well. But some investors are still taking the risk of buying up office buildings. The Biltmore Financial Center sold for $163.1M this past July, making it the largest multi-tenant office deal since 2007.
Vacancy rate: 19.7%
It wasn't long ago that Detroit, buried in billions of dollars of debt, went bankrupt. Since then, Detroit's been trying to recruit top talent and companies to help fuel the economy, and of course commercial leasing. With the rate dropping less than 1% from the beginning of this year, Detroit is very slowly seeing the conversion of old and empty buildings into office spaces in attempts to attract companies from the suburbs.
3. Dallas-Fort Worth
Vacancy rate 17.9%
Despite a high vacancy rate compared to the nation, this percentage is one of Dallas' lowest since 2000. Desired submarkets in the region are Preston Center, Uptown and Far North Dallas. Preston Center will see the addition of a new 12-story, 172k SF office complex slated to be ready in 2017.
Vacancy rate: 16.1%
Chicago's office vacancy rate peaked at 17.3% in 2010 and has steadily been declining as the US economy improves. Chicago's notable Willis Tower was sold this past year for the highest price of an American office building outside of New York. This past year, Chicago office landlords received the highest returns on real estate investments out of all other property types.
5. Los Angeles
Vacancy rate: 15.6%
As of Q2, about 2.3M SF of new office space was under construction in the City of Angels, with Hollywood seeing the majority of the new development. Los Angeles has been seeing the trend of falling vacancy rates, which has pushed landlords to raise average asking rents up 6%.