4C — July 31 - August 13, 2015 — Brokerage Directory — Mid Atlantic Real Estate Journal
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B rokerage D irectory
Gains in Non-CBD leasing, delivery of new, modern space are key trends Cushman & Wakefield: U.S. office market’s momentum continued in Q2
T
he U.S. office market continued its healthy pace in the second quar-
Year-over-year, total leas- ing activity was actually down slightly, by 3.5% from 2014’s watershed performance, but the non-CBD markets were up slightly over the same period. The most improved markets were Northern VA, up 138%, with activity driven by gov- ernment-related tenants and private sector tenants that have once again become active; and Central New Jersey, up 100%, driven by the pharmaceutical and communications sectors. “With mergers and consoli- dations completed, the phar- maceutical sector in Central New Jersey is seeing renewed
growth,” said Sicola. “Those mergers and consolidations had resulted in some layoffs, and entrepreneurial former employ- ees have sparked a wave of new start-ups.” Absorption is also healthier in the non-CBD markets, driv- en by the occupancy of newly delivered office product. Cali- fornia’s Silicon Valley topped the list of non-CBD markets, with technology-based ten- ants particularly on the rise in the cities of Mountain View, Sunnyvale and Santa Clara. And although second quarter CBD market absorption was off from the level of a year ago, “it’s important to note that 70% of the markets we track have ex- perienced increased occupancy levels this year,” said Sicola. “Financial services downsizing in Downtown New York and the downturn in Houston’s energy sector have negatively impacted overall CBD absorption, which has otherwise been strong.” Overall, vacancy rates in both the CBD and non-CBDmarkets continued to decline in the sec- ond quarter, according to Cush- man & Wakefield Research. That decline has been slow but steady, reaching their lowest levels since the recession year of 2008, currently 11.8% and 16.1% respectively. Occupancy levels are current- ly approaching 70% in newly constructed properties as com- panies continue to seek modern, state-of-the-art space. Nearly 11 million s/f of space has been completed nationally to date in 2015, with an additional 23.2 million s/f in the pipeline for the remainder of 2015. Driven by the market’s con- tinuing momentum, overall ask- ing rents continued to climb in the second quarter, up 4.5% in the CBDs and 2.3% in the non- CBD markets. Major CBD mar- kets experiencing the greatest increases include San Francisco (14%); Portland, OR (13.2%); and Dallas (11.7%). “Those in- creases are attributable to the fact that those markets have significantly tightened,” said Sicola. “Several markets are expected to see some large-scale occupan- cies in the second half of 2015,” she said. “As a result, we expect to see vacancy rates continue to decrease for the remainder of the year. We also expect to see average asking rents continue to improve as a result of the strong demand for high-quality space.” n
Lowest CBD Office Vacancy Rates 1. Midtown South New York 6.2% 2. San Francisco 7.4% 3. Midtown New York 8.9% 4. Boston, MA 9.7% 5. Portland, OR 9.7% NATIONAL AVERAGE 11.8% Lowest Non-CBD Office Vacancy Rates 1. San Francisco 4.4% 2. Silicon Valley, Calif. 8.3% 3. SF Peninsula 9.4% 4 San Diego, CA 11.7% 5. Ft. Lauderdale, FL 12.0% NATIONAL AVERAGE 16.1%
ter of 2015, according to commercial rea l es tat e services firm Cushman & Wa k e f i e l d . “The ea r l y positive mo- m e n t u m
Maria T. Sicola
generated in the first quarter continued,” saidMaria T. Sicola, the firm’s head of Research for the Americas. “That momentum can be seen in terms of absorp- tion and rental rate growth.”
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