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Porter Novelli, 2007-07-23
by Kristin Sadlon
Boston, MA/USA
As anticipated, the U.S. office market staged a modest comeback in the second quarter, with absorption increasing by 34 percent and rents continuing to surge higher, according to a report by Colliers International, a leading global real estate services firm.
Second quarter office absorption totaled 18.3 million square feet (msf), versus 13.7 msf during the first quarter and 27.8 msf during the year-ago period. Despite this healthy increase, second quarter job creation only met expectations with 148,000 jobs per month and "office using" employment continued to slow - increasing by 1.7 percent over the year compared with a 2.0 percent increase at the close of Q1. Year-to-date absorption currently sits at 32.0 msf.
The Q2 vacancy rate measured 12.26 percent, marginally down from 12.27 percent in the first quarter and down from 13.09 percent in the second quarter of 2006.
"As predicted, demand for office space picked up relative to the first quarter, but is still operating below anticipated levels," observed Ross Moore, senior vice president and director of market & economic research at Colliers International. "Of particular concern is the slowdown in the office using employment. However, that aside, the story is generally the same - steady demand, significant increases in rents and a gradual increase in supply."
Rents posted further spikes during Q2, with downtown lease rates rising particularly sharply. Downtown asking rents jumped 8.3 percent during Q2 to reach an average of $46.81 per square foot (psf), unsurprisingly led by Midtown Manhanttan. Suburban rents increased 4.5 percent to $27.45 psf. This left downtown rents up 24.7 percent over the year, while suburban rents increased by 10.0 percent.
Fewer markets (7 copared with 10 at the end of Q1) anticipate less demand for space in the coming three months - while the clear majority have forecasted steady if not rising demand in their market.
As for new construction, completions totaled 17.5 msf during the second quarter, compared with 14.1 msf in Q1; and year-agp completions totaled 14.6 msf. Another 114.9 msf is currently under construction, most of which is anticipated to be completed in the next 18 months. 119.2 msf was under construction at the end of the first quarter, as compared with 85.2 msf in the year-ago quarter.
Downtown Q2 '07 Rents ($PSF)
| MARKET |
RENT |
| Atlanta, GA |
21.80 |
| Bakersfield, CA |
17.40 |
| Boise, ID |
18.26 |
| Boston, MA |
48.70 |
| Charleston, SC |
27.75 |
| Charlotte, NC |
23.43 |
| Chicago, IL |
42.00 |
| Cincinnatti, OH |
22.34 |
| Cleveland, OH |
20.01 |
| Columbia, SC |
20.27 |
| Columbus, OH |
22.13 |
| Dallas/Ft. Worth, TX |
24.50 |
| Denver, CO |
25.77 |
| Detroit, MI |
22.50 |
| Fresno, CA |
27.60 |
| Ft. Lauderdale, FL |
31.94 |
| Greenville, SC |
18.27 |
| Hartford, CT |
24.03 |
| Honolulu, HI |
34.56 |
| Houston, TX |
32.50 |
| Indianapolis, IN |
19.47 |
| Jacksonville, FL |
20.00 |
| Kansas City, MO |
20.48 |
| Las Vegas, NV |
39.60 |
| Los Angeles, CA |
35.88 |
| Louisville, KY |
19.50 |
| Miami, FL |
36.99 |
| Milwaukee, WI |
22.00 |
| Minneapolis/St. Paul, MN |
26.37 |
| Nashville, TN |
20.89 |
| New York, NY - Downtown Manhattan |
53.76 |
| New York, NY - Midtown Manhattan |
92.31 |
| New York, NY - Midtown South Manhattan |
59.36 |
| Oakland, CA |
30.48 |
| Orlando, FL |
26.86 |
| Philadelphia, PA |
24.63 |
| Phoenix, AZ |
21.69 |
| Pleasanton, CA |
27.48 |
| Portland, OR |
23.22 |
| Reno, NV |
23.52 |
| Sacramento, CA |
30.72 |
| San Diego County, CA |
34.80 |
| San Francisco, CA |
45.86 |
| San Jose/Silicon Valley, CA |
32.52 |
| Seattle, WA |
32.07 |
| St. Louis, MO |
20.58 |
| Tampa Bay, FL |
21.26 |
| Washington, DC |
47.09 |
| West Palm Beach, FL |
37.16 |
| US AVERAGE |
46.81 |
Suburban Q2 '07 Rent ($PSF)
| MARKET |
RENT
|
| Atlanta, GA |
22.64 |
| Bakersfield, CA |
24.00 |
| Boise, ID |
18.13 |
| Boston, MA |
22.36 |
| Charleston, SC |
25.50 |
| Charlotte, NC |
20.23 |
| Chicago, IL |
23.34 |
| Cincinnatti, OH |
19.94 |
| Cleveland, OH |
20.95 |
| Columbia, SC |
17.70 |
| Columbus, OH |
18.41 |
| Dallas/Ft. Worth, TX |
26.50 |
| Denver, CO |
22.91 |
| Detroit, MI |
23.50 |
| Fresno, CA |
27.60 |
| Ft. Lauderdale, FL |
29.66 |
| Greenville, SC |
18.27 |
| Hartford, CT |
20.60 |
| Houston, TX |
24.41 |
| Indianapolis, IN |
19.36 |
| Jacksonville, FL |
20.50 |
| Kansas City, MO |
21.64 |
| Las Vegas, NV |
34.69 |
| Los Angeles, CA |
37.29 |
| Louisville, KY |
20.00 |
| Miami, FL |
32.18 |
| Milwaukee, WI |
21.00 |
| Minneapolis/St. Paul, MN |
26.79 |
| Nashville, TN |
21.07 |
| New Jersey - Central |
26.41 |
| New Jersey - Northern |
28.52 |
| New York - Fairfield County, CT |
31.43 |
| New York - Westchester County, NY |
29.43 |
| Oakland, CA |
28.68 |
| Orange County, CA |
37.49 |
| Orlando, FL |
23.27 |
| Philadelphia, PA |
24.53 |
| Phoenix, AZ |
23.52 |
| Pleasanton/Walnut Creek, CA |
26.52 |
| Portland, OR |
24.67 |
| Reno, NV |
24.00 |
| Sacramento, CA |
26.52 |
| San Diego County, CA |
36.60 |
| SF Peninsula - San Mateo County, CA |
37.80 |
| San Jose/Silicon Valley, CA |
36.24 |
| Seattle, WA |
27.57 |
| St. Louis, MO |
23.00 |
| Stockton, CA |
18.84 |
| Tampa Bay, FL |
24.56 |
| Washington, DC - N. Virginia |
34.50 |
| Washington, DC - Suburban, MD |
29.00 |
| West Palm Beach, FL |
29.59 |
| US AVERAGE |
27.45
|
About Colliers International
Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 9,327 employees span the world in 241 offices in 54 countries. On a worldwide basis, Colliers manages 595,725,580 square feet, and has revenue of $US 1,442,478,223. For more information, visit www.colliers.com.
Contact Information
Kristin Sadlon
Porter Novelli
212.601.8192
Kristin.sadlon@porternovelli.com
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