KEY TAKEAWAYS

  • Seven markets saw office vacancy rise modestly and five witnessed negative absorption. Weak GDP growth could be restraining demand, but other indicators — such as rising income growth, increased spending and faster global growth — suggest possible absorption upside.
  • Manhattan made a strong start to 2017 with high leasing volume, record rents and sustained tight vacancy.
  • In Chicago, pre-leasing of new trophy office towers remains strong. The rapid take-up of this space is allowing landlords of existing trophy assets to push rents.
  • West Coast markets — including Los Angeles, the San Francisco Bay Area and Seattle — are seeing an increase in speculative supply that will likely suppress rents and cause vacancy to rise. However, there is still healthy lead-in time for some projects to pre-lease.
  • In some markets — notably Washington, D.C. — asking rents are rising due to new product entering the market. Expect the gap between asking and effective rents to widen as concessions increase.
  • Tech firms continue to be a significant driver of office leasing activity and market shifts. For example, tech demand is fueling Boston’s Class B space and conversions to outperform prestigious Class A towers.