In the third quarter of 2018, the U.S. office market again showed steady improvement, according to Transwestern’s national outlook for the sector. Absorption reached 22.7 million square feet, vacancy remained stable at 10.1%, and asking rents increased by 4.0%, annually.
Ryan Tharp, Research Director in Dallas, said the strong economy has contributed to the office market’s momentum, despite softer income growth in a very tight labor market.
“Real gross domestic product increased at an annualized 3.5%, according to first estimates, and personal consumption contributed 2.7% to that rate,” Tharp said. “Because inflation has remained in line with the Federal Reserve’s target of 2.0%, consumer and business confidence should keep the office market healthy well into 2019.”
A positive sign is that year-to-date net absorption in the office market was 17.1% higher at the end of the third quarter than it was for the same period last year. Dallas-Fort Worth, San Francisco and Denver led in absorption by a significant margin for the prior 12 months, with a combined 13.3 million square feet.
Meanwhile, demand and supply are headed for equilibrium as new construction activity peaked in early 2017. In the third quarter, only 146.3 million square feet was under construction nationally.
“It’s encouraging to see that office demand is broad-based across multiple sectors, with the technology and coworking sectors driving demand as we move later in the cycle,” said Michael Soto, Research Manager in Los Angeles. “If demand continues unabated, rental rate growth should moderate.”
Year-over-year, Minneapolis, San Antonio, and Charlotte, North Carolina, have experienced the most dramatic rent growth, all coming in at 10% or greater. The strong performance of secondary markets demonstrates that the office sector is not being propped up by a few formidable markets.
Download the national office market report at: http://twurls.com/3q18-us-
Related Stories
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.
Market Data | Sep 17, 2018
ABC’s Construction Backlog Indicator hits a new high in second quarter of 2018
Backlog is up 12.2% from the first quarter and 14% compared to the same time last year.
Market Data | Sep 12, 2018
Construction material prices fall in August
Softwood lumber prices plummeted 9.6% in August yet are up 5% on a yearly basis (down from a 19.5% increase year-over-year in July).
Market Data | Sep 7, 2018
Safety risks in commercial construction industry exacerbated by workforce shortages
The report revealed 88% of contractors expect to feel at least a moderate impact from the workforce shortages in the next three years.
Market Data | Sep 5, 2018
Public nonresidential construction up in July
Private nonresidential spending fell 1% in July, while public nonresidential spending expanded 0.7%.
Market Data | Aug 30, 2018
Construction in ASEAN region to grow by over 6% annually over next five years
Although there are disparities in the pace of growth in construction output among the ASEAN member states, the region’s construction industry as a whole will grow by 6.1% on an annual average basis in the next five years.
