Downtown Markets Propel U.S. Office Rents Higher

  • Gross asking rents increased by 4.4% year-over-year in Q1 2019, continuing a pattern of accelerating rent growth over the past year.
  • Downtown office rents provided the bulk of the national increase in Q1, surging 7.0% year-over-year. Suburban rents grew at a solid but less robust clip as well.
  • The overall office vacancy rate remained at 12.5% in Q1, its lowest level since 2007. The U.S. downtown vacancy rate increased by 10 basis points (bps) to 10.5% after three consecutive quarterly declines. The suburban vacancy rate dropped by 10 bps in Q1 and 70 bps from one year ago.
  • Net absorption totaled 11.0 million sq. ft. in Q1, a decline from the 18.3 million sq. ft. absorbed in Q4 2018. Nonetheless, 12-month absorption through Q1 2019 totaled 62.7 million sq. ft., the highest 12-month total in three years.
  • Construction completions fell to 9.6 million sq. ft. in Q1, well-below the three-year quarterly average of 11.6 million sq. ft. Recent completions have helped bolster office asking rents.