IRVINE, CA—Despite steady improvement in the national employment picture, and office-using job sectors in particular, office as an asset class is skating on pretty thin ice, Ten-X Commercial says in its latest outlook report on the sector. The report cites little movement in nationwide vacancies over the past two years and rent growth slowing to its most sluggish pace in five years.

In fact, Ten-X says in the just-released US Office Outlook, job growth among office-using sectors has surpassed the pace seen in prior economic expansions—with the tech industry being a notable driver. Yet coinciding with the cycle's employment gains have been reductions in the amount of square footage per employee, due to technology and workstyle changes that have created a surplus of space.

As of the third quarter of 2017, vacancies nationwide were unchanged from a year ago at 16.1%. However, Ten-X says they're projected to rise to 18.3% in 2021 after a modeled recessionary period in 2019-2020. Office rent growth slowed to the 1% range last year, the slowest pace since 2012. And while rent growth is expected to increases to 2% this year, the aforementioned modeled recession is expected to lead to contraction of about 2.5% during that time.