The office market is improving across the Midwest and the country.
It’s easy to see the improvements in the multi-family and industrial markets. You can even see it in the retail sector, with new grocery stores, casual-fast restaurants and high-end retailers opening across the country.
It’s a bit harder to see signs of the commercial real estate recovery in the country’s office sector, though. Unemployment remains far too high. And that means that many businesses have put expansion plans on hold, keeping vacancies in the office sector too high and asking rents too low.
But there is hope in this sector. And the latest research from Cassidy Turley — released July 2 — proves it.
According to Cassidy Turley’s latest office report, demand for U.S. office space strengthened in the second quarter of 2013. Cassidy Turley found that 60 out of the 82 metropolitan areas it tracks say positive gains in occupancy during the quarter.
In total, U.S. office markets absorbed 15.1 million square feet of office space during the quarter. That’s a big improvement from the 5 million square feet they absorbed during the first quarter of the year. In fact, the second quarter ranks as the third-strongest quarter for the office market since the economic recovery that began in 2010.
Office vacancy rates are still too high, but they are trending down. Vacancy rates in this sector during the second quarter fell 10 basis points to 15.3 percent. This means that the U.S. office vacancy rate is down 1.9 percent from its recessionary peak of 17.2 percent.
Of course, there is still room for improvement. Kevin Thorpe, chief economist for Cassidy Turley, says that he expects office vacancy rates to continue to fall as the year progresses.
“Business growth has been strong enough to generate consistent improvement in the office-leasing fundamentals,” Thorpe said in a written statement.
Average asking rents in the second quarter showed improvement, too. According to Cassidy Turley, asking rents averaged $21.74 during the quarter, up 3 percent from the same period one year earlier.
The Chicago and Omaha markets were both cited by Cassidy Turley as being among those markets seeing the most net absorption of office space during the second quarter. Chicago absorbed 780,000 square feet of office space during the quarter, while Omaha absorbed 703,000 square feet.
The top markets in terms of rent growth include Columbus, Ohio, which saw rents jump 8.4 percent, and Nashville, where rents jumped 5.9 percent.
– Dan Rafter
