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Tenant demand for office space slowed in Q1—dragged down by weakness in the oil field and a pullback in the tech sector—but net absorption remained strong enough to push up occupancy levels and rents in most markets, Cushman & Wakefield says.
On the heels of the highest demand in nine years, total US net absorption of office space slowed by 59% in Q1 to 9.7M SF. Yet despite the deceleration tenant demand for office space kept pace with new construction.
Even with the office space pullback, there is reason to believe things look solid. Cushman & Wakefield chief economist Kevin Thorpe says the office sector is underbuilding relative to job creation, so even when there is weak absorption vacancy rates remain tight and rents will rise.
And almost as if on cue, rents continue to rise (office rents jumped 4.1%) while vacancy rates remain flat at 13.5%, the tightest level since Q3 of 2008.
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