US office asking rents increased by 0.4% in May over the previous three-month period, to $36.33, according to Yardi Matrix. This uptick is occurring as amid a slowing pace of investment sales and an additional 2.9% of new stock is preparing to enter the pipeline. Despite these various trends, the national vacancy rate remains unchanged at 13.7%. "The market continues to produce steady but moderate growth, as strong demand from the bullish job market is counterbalanced to some degree by companies' increasingly selective use of office space," Yardi Matrix says. Transaction volume continues to run behind last year's pace, with $28.5 billion of sales closed through May [see slideshow for individual market sales]. However, deal flow has picked up since the first quarter, Yardi Matrix says, also noting that the drop in the 10-year U.S. Treasury rate to just over 2% could boost sales, as the cost of debt is expected to remain low. Meanwhile, more product is coming on the market with some 173 million square feet under construction. Yardi Matrix observes that "that seems like a lot, considering that we could be entering the later portion of the economic cycle", but goes on to say that the pipeline is mostly concentrated in metros that have growing space needs and those where there is strong demand for newer product with the latest technology and amenities. In all, Some 22.3 million square feet of office space came online through May, with 60% representing CBD (3.3 million) or urban (10.2 million) space. Suburban markets have added 8.8 million square feet through May this year.

Manhattan

With 20.8 million square feet under construction (representing 4.4% growth of total stock), Manhattan has more than twice as much as any other metro. The deliveries could put a strain on the borough's occupancy rate, but the market has been able to absorb most of the recent new stock without much of a problem, Yardi Matrix says. Manhattan's vacancy rate is 8.4%, among the lowest of major metros in the US, it also notes.

Nashville

Yardi Matrix highlights Nashville as another metro with a heavy construction pipeline . The Music City has 5.2 million square feet of space under construction, which will add a robust 10.2% to total stock, it says. The downtown alone has 3.5 million square feet of space under construction, although less than one-third of that is scheduled to come online before the end of 2019. Even so, the development will test Nashville's growth in coming years in a big way, according to the report. "Unlike other metros with big pipelines, it is not known for its office-using employment sectors, although its economy has expanded measurably in the past decade."

Individual Markets' Asking Rates

Markets with the biggest short-term growth in average asking rates include Brooklyn (10% three month change), Houston and San Francisco (3.8%), Orlando (3.1%) and the Bay Area (2.7%). On the flip side, markets that have seen average prices drop include Philadelphia (2.3% over three months), Boston (-4.7%) and Seattle (-5.4%). The numbers represent the average asking rent of space available for lease, so they are susceptible to changes as large properties come on and off the market, according to Yardi Matrix.

Houston

In Houston, for example, same-store rent growth has increased only slightly in recent months with the short-term gains driven by new listings at the Texas Tower in the central business district, which is asking $59 per square foot. The 1 million-square-foot, 47-story tower is being built by a Hines and Ivanhoe Cambridge partnership on the site of the former Houston Chronicle building close to the Theater District and Historic District, and is scheduled to open in the spring of 2021. The report also tells of another new listing in Houston: the 1.4 million-square-foot Williams Tower, a Class A+ building with an asking rate of $48.86 per square foot.