Vacant space in the U.S. office market declined by 10 basis points (bps) during the fourth quarter of 2016 (Q4 2016) to 12.9 percent, according to the latest office vacancy analysis from global property advisor CBRE Group.
Markets in suburban areas continued to outperform downtown office spaces, with office vacancy in the suburbs dropping 20 bps to 14.1% in Q4 2016. Downtown vacancy remained unchanged at 10.7%. The national office vacancy rate remains at its lowest level since 2008, and has declined 20 bps over the past twelve months.
Overall vacancy fell in most U.S. markets, with vacancy declining in 37 of 63 office markets. The nation’s lowest vacancy rates at year-end were in Nashville (5.5%), San Francisco (6.4%), Raleigh (7.2%), Austin (7.8%), Seattle (8.2%), Oakland (8.8%), San Jose (9.0%) and Pittsburgh (9.6%).
"The office market continued its slow, steady march of declining vacancy in the fourth quarter but a tight labor market may limit net absorption going forward. As new supply ramps up, the vacancy rate could trend upward," says Jeffrey Havsy, Americas’ Chief Economist for CBRE.
Some of the largest office vacancy declines were in Midwest markets that were late to the recovery. While the vacancy rates in many of those markets remain elevated, they are moving in a positive direction.
Mid-size Midwest markets showed the largest quarterly declines, including Cleveland (120 bps), Louisville (120 bps) and Milwaukee (120 bps). In addition, Cincinnati, Raleigh, Ventura (CA) and Detroit each declined by 80 bps or more. In the past year, the vacancy tightening was found predominantly in mid-sized markets across the nation.
The Q4 2016 U.S. Office MarketView Snapshot is available for download from the CBRE Global Research Gateway site with registration.