Office leasing activity continued to slow in the first quarter of the year, according to a first quarter report from Newmark Knight Frank. Quarterly absorption was flat at 63,902 square feet, and the vacancy rate continued to remain at 14% as it has for the last 10 quarters. While there were gains in some markets—namely Downtown Lo Angeles—the leasing velocity overall has slowed. While the knee jerk response is to assume economic issues, David Kluth of Newmark Knight Frank, says that the real reason is the high level of employment.

“Our research shows that white-collar employment is nearing peak levels, and white-collar employment is decelerating,” Kluth, an executive managing director and office market expert at NKF, tells GlobeSt.com. “The gains in white-collar job jobs has been under 2% for the last year and a half, and that has really had an impact on the Los Angeles office market. Job growth decelerating is really the reason we have seen leasing activity slow compared to prior quarters.”

While employment is reaching peak levels, Kluth maintains that we are still in a healthy market with healthy employment activity. This is really a conversation of slowed growth, not a declining market. “The market is not unhealthy, and we haven't reached unhealthy levels of negative employment,” he says. “The market growth is just decelerating as we reach near peak levels of employment compared to prior quarters.”