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Office Sector Steady in CBDs, Growing in Suburbs

CALABASAS, CA—Emerging trends in usage and six years of declining vacancy provide a solid foundation for continued office stability, says Marcus & Millichap.

By John Salustri | johnsalustri | Updated on March 09, 2017

US vacancy rates have declined for six straight years. US vacancy rates have declined for six straight years.

CALABASAS, CA—Four factors contribute to what is shaping up to be a positive outlook for the national office sector, according to a newly released report from Marcus & Millichap. First are the fundamentals: Growing demand and declining vacancy make for growth in rental rates in both the CBDs and, somewhat surprisingly, the suburbs. But there are also changes taking place in usage, pushing the sector to a more vibrant part of the market that is responding to a new generation of user need.

“The decline in the US vacancy rate in 2016 marked the sixth consecutive annual decrease and also highlighted emerging trends that could become more firmly entrenched,” the report states. Net absorption of roughly 83 million square feet will just surpass the 82 million feet of completions anticipated for the year to produce a 14.3% vacancy rate—a 20-basis-point decline over last year. And tightening vacancies will naturally lead to a rise in rents, which the report tags at 3.5%.

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