US Office Market Still Strong at Mid-Year

BOSTON, MA-After struggling for much of the decade, this city’s office market has recovered to fourth nationally for tightest vacancy rates at 7.1%, according to a mid-year report issued by CB Richard Ellis. The survey gives Charlotte, NC, the top spot for the second straight quarter at 3.1%, followed by Midtown and Downtown Manhattan at 4,8% and 7.0%, while Las Vegas rounds out the top five at 8.5%. Average rents nationally increased by 5.7% for downtown space versus 3.6% in the suburbs during the quarter, says the report.

“Demand for office space remained strong across the country,” says Ward Caswell, CBRE’s Boston-based director of research for the US. CBRE registered 17 million sf of positive absorption in the second quarter, 14 million sf of which occurred in the suburbs. Even so, CBD vacancies averaged 10.6% compared to 13.7% in the suburbs, with each indice dipping by 20 basis points in the second quarter to reach the lowest level since late 2001. The blended US average vacancy was 12.6%, also down 20 basis points from the first quarter.

Caswell cited the growing economy for driving the suburban activity, and termed the velocity “welcome news to landlords in the face of expected construction.” While completions of new space in the second quarter was just 1.5 million sf for downtown markets, and was delivered mainly in Atlanta and Washington, D.C., the suburbs had 10.1 million sf come on line, with more headed for completion through 2008.