WASHINGTON D.C.– In the second quarter of this year, the U.S. office market recorded its strongest level of demand for office space in nearly four years according to the latest figures published by Cassidy Turley, a leading commercial real estate services provider in the US. Net absorption for office space climbed to +12.8 million square feet (msf) in the second quarter of 2011, marking the fifth straight quarter of positive demand and the largest gain since the third quarter of 2007. U.S. office vacancy fell 10 bps (basis points) from the previous quarter to 16.4% and rents remained flat at $21.40.
Kevin Thorpe, Cassidy Turley’s Chief Economist, remains cautiously optimistic, “The office sector recovery is strengthening and is spreading to more areas, and that is certainly encouraging.” Of the 82 metropolitan areas covered in the report, 62 recorded positive demand for office space in the second quarter.
Mr. Thorpe cautions, “However, this is still a debt-overhang recovery, which means the U.S. economy will continue to move in fits and starts, and we should expect the same bumpy ride for the property markets.”
Investment sales continue to gain momentum. According to Real Capital Analytics, office sales volume registered at $17.9 billion in the first 5 months of 2011, up 126% from the same period a year ago. Average price per square foot registered at $211 in May, up 25% from a year ago.
Mr. Thorpe adds, “In recent months, nearly one out of every four deals fall into the category of distressed assets. Throw those deals out of the equation, and you would observe an even steeper upward trajectory in values, particularly for properties located in Central Business Districts.”
Regionally, net absorption in the West registered at +5.7 msf, up from +5.1 msf in the previous quarter. Office vacancy fell 20 bps from the previous quarter to 16.3%, and average asking rents rose 5 cents to $23.20.
Net absorption in the South registered at +4.2 msf, down from +4.4 msf recorded in the previous quarter. The vacancy rate in the South was 15.5%, down 20 bps from the previous quarter. Average asking rents in the South were $20.58, down 6 cents from the previous quarter.
Net absorption in the Northeast increased to +2.6 msf, up from +368,000 sq in the previous quarter. Office vacancy in this region remained unchanged at 15.5% and average asking rents increased slightly to $23.53.
In the Midwest, net absorption registered at +417,000 for the second quarter of 2011, erasing a drop of -417,000 observed in the previous quarter. Vacancy in the Midwest ticked up 10 bps from the previous quarter to 19.8%. Average asking rents in the Midwest increased from $18.29 to $18.33 over the same period.
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