Q3 2015 U.S. Office OccupierView

December 8, 2015

 

Overview

  • U.S. office demand remained strong in Q3 2015, with net absorption again registering nearly twice the quarterly average since 2007. This further tightened market conditions for occupiers and pushed Q3 2015 downtown (10.4%) and suburban (15.0%) vacancy toward their previous (2007) respective lows of 9.7% and 13.9%.
  • Dallas/Ft. Worth, Houston, San Jose, San Francisco and Phoenix top the rankings for positive net absorption, both in Q3 2015 and year-to-date.  These markets account for a 38% share of the nation’s year-to-date net absorption.
  • The Q3 2015 U.S. gross average asking rent of $29.36 per sq. ft. increased 1.3% from the previous quarter and 4.8% from a year earlier. Double-digit year-over-year rent increases occurred in Denver, San Francisco, Seattle, and the San Francisco Peninsula. Rents in Cambridge, suburban Philadelphia and Washington, D.C. stayed flat to slightly down.
  • The high-tech sector has dominated major leasing activity in 2015, accounting for one-fifth of leasing transaction volume both year-to-date and in Q3 2015. Healthcare and life sciences accounted for the second- largest share of leasing activity in Q3 2015, 13.4%, representing the largest increase by any sector since 2014. The creative industries and financial services share of major leasing activity continued its downward slide.
  • We anticipate demand to outpace new supply as deliveries of new product remain limited relative to the previous cycle, likely through 2017. With office-using job growth on solid footing, this dynamic is projected to lower vacancy rates and produce sustained rent growth over the next few years.

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