U.S. office market fundamentals remain at their strongest point in the cycle, with peak occupancy and record rents. Yet, there is little doubt that the market has been cooling.
The national office vacancy rate has been virtually static for more than a year. Rents are still rising but the pace of appreciation is modest and slowing. Likewise, absorption is still positive but Q1 2017 was relatively quiet and activity was concentrated in suburban markets. Office space under construction rose for the third successive quarter in Q1 2017, while investors continue to chase higher returns — leading to an increased focus on suburban and second-tier markets.