Strong Economic & Job Growth Fuel Highest Annual Demand Since 2015
- The overall office vacancy rate dropped by 10 basis points (bps) in Q4 2018 to 12.6%, the lowest level in 11 years. The suburban vacancy rate fell by 20 bps to a 17-year low of 13.7%, while the downtown vacancy rate was unchanged at 10.5%. More than 70% of markets tracked by CBRE Research registered vacancy rate declines in 2018. Tech markets Seattle and San Jose recorded the largest vacancy rate decreases among major markets, bringing vacancy in both metros below 10%.
- Net absorption totaled 58.3 million sq. ft. for the year, the best since 2015. More than 90% of markets tracked by CBRE Research posted positive absorption in 2018, and more than 80% recorded positive absorption in Q4, illustrating the breadth of the office market expansion.
- Net absorption surged to 3.8 million sq. ft. in Manhattan in Q4, by far the highest level in the U.S., driven by demand from financial and tech firms and flexible space providers. Western tech markets San Francisco, San Jose, Seattle and Denver accounted for more than 14 million sq. ft. of absorption for the year.
- Construction completions totaled 49.0 million sq. ft. in 2018, the second-highest annual total since 2009. Reflecting strong demand for new, high-quality space, nearly 70% of the square footage delivered in 2018 in the markets tracked by CBRE Research was preleased.
- The average gross asking rent increased by 2.7% in 2018, up slightly from 1.8% in 2017. Nearly 95% of markets tracked by CBRE Research recorded rent growth for the year, including many tech markets. Portland, Boston, Orlando, San Francisco, Oakland, Seattle, Denver and Austin all posted rent growth of 6.5% or higher.