Transwestern’s first quarter national office report confirmed the general opinion that the U.S. office market remains strong, with overall vacancy holding steady at 9.8%. National average asking rents nudged higher during the quarter to $26.63 per square foot, reflecting a 4.1% annual growth rate that exceeded the five-year compound annual average (CAGR) of 3.4%.
Of the 49 U.S. markets tracked by Transwestern, 45 reported positive rent growth, with 24 of those recording rates above 3.0%. The leaders in rent growth included Minneapolis; San Francisco; San Jose, California; Nashville, Tennessee; Raleigh/Durham, North Carolina; Tampa, Florida; Pittsburgh; California’s Inland Empire; Manhattan; and Charlotte, North Carolina.
“The U.S. economy grew 3.2% in the first quarter, the highest first-quarter growth in four years,” said Ryan Tharp, Research Director in Dallas. “That said, we are closely watching how factors such as U.S. trade conditions might impact the domestic economy in the remainder of 2019.”
Overall office leasing activity in the U.S. has slowed since 2016 but still ended the first quarter 1.5 million square feet higher than a year ago. Net absorption fell to 10.9 million square feet, with sublet space recording negative growth of 1.6 million square feet.
Construction activity jumped 9.7% during the past year, the highest level in the current cycle, but rising land and construction costs and labor challenges continue to limit new building deliveries and stave off systemic overbuilding that undermined some previous cycles.
“Solid fundamentals and adequate debt and equity capital bode well for continued, healthy performance in the office sector and cap rates remain at historic lows,” Tharp said. “We expect asking rents to settle at an annual rate of growth between 3.0% and 3.5% by the end of the year.”
Download the full National Office Market Report at: http://twurls.com/1q19-us-office
Related Stories
Market Data | Oct 26, 2018
Nonresidential fixed investment returns to earth in Q3
Despite the broader economic growth, fixed investment inched 0.3% lower in the third quarter.
Market Data | Oct 24, 2018
Architecture firm billings slow but remain positive in September
Billings growth slows but is stable across sectors.
Market Data | Oct 19, 2018
New York’s five-year construction spending boom could be slowing over the next two years
Nonresidential building could still add more than 90 million sf through 2020.
Market Data | Oct 8, 2018
Global construction set to rise to US$12.9 trillion by 2022, driven by Asia Pacific, Africa and the Middle East
The pace of global construction growth is set to improve slightly to 3.7% between 2019 and 2020.
Market Data | Sep 25, 2018
Contractors remain upbeat in Q2, according to ABC’s latest Construction Confidence Index
More than three in four construction firms expect that sales will continue to rise over the next six months, while three in five expect higher profit margins.
Market Data | Sep 24, 2018
Hotel construction pipeline reaches record highs
There are 5,988 projects/1,133,017 rooms currently under construction worldwide.
Market Data | Sep 21, 2018
JLL fit out report portrays a hot but tenant-favorable office market
This year’s analysis draws from 2,800 projects.
Market Data | Sep 21, 2018
Mid-year forecast: No end in sight for growth cycle
The AIA Consensus Construction Forecast is projecting 4.7% growth in nonresidential construction spending in 2018.
Market Data | Sep 19, 2018
August architecture firm billings rebound as building investment spurt continues
Southern region, multifamily residential sector lead growth.
Market Data | Sep 18, 2018
Altus Group report reveals shifts in trade policy, technology, and financing are disrupting global real estate development industry
International trade uncertainty, widespread construction skills shortage creating perfect storm for escalating project costs; property development leaders split on potential impact of emerging technologies.