The pent-up demand that's driven frothy office leasing is leveling out. Finally, tenant reps can take a breath. (Demand is like a newborn: it needs constant attention and it never sleeps.)
Cresa principal Sue Rogers, managing principal Andre Granello, and principal Steven Heal tell us office construction continues to rise (permitting has increased 19% from last year), but developers may find it trickier to fill those buildings. (Cardboard cutouts of people sitting at desks is apparently off limits.) Steve says the last jobs report showed energy hiring, which has been the bulk of spec absorption, slowed. That, coupled with some recent M&A space consolidations, opened up pockets of opportunity for tenants. For example, Andre just closed a 50k SF deal Downtown and was able to benefit from a brief moment where the submarket approached 12% vacancy (we're back below 10% now). As a result, the tenant was able to choose from some of the best economic offerings Andre's seen there in years.
The trio is quick to say that the potential leasing slowdown is not indicative of our economy weakening. Andre says major companies have spent the last few years getting ahead of demand, so it's unlikely we'll continue to see our breakneck pace continue. Sue expects our economy will continue strong, even as we level off in the next phase of our real estate cycle.
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