Demand for U.S. office space is slowly rising, with employers taking on 8.2 million square feet of additional office space in the second quarter. Although this is a relatively modest increase compared to previous years, but it marks one of the stronger periods since the recession.
According to the Wall Street Journal, studies conducted by real-estate research service, Reis Inc., show that despite the increase posted for the second quarter of this year, the overall office vacancy rate fell, registering at 16.6 percent, which is just 1 percent down from the peak of 17.6 percent reached in 2010. And while office vacancy rate is down, rates of office rentals rose to an average of $24.60 a square foot, up 3.2 percent over the past 12 months.
And though it indicates a somewhat sluggish growth, the upward trend is a sign that the U.S. office market is starting to pick up again. Ryan Severino, an economist at Reis said, "I don't think we're in the clear yet, but we are definitely heading in the right direction. It has taken a little bit longer than usual to get back to where we'd like to be."
Meanwhile, a report from property consultant DTZ, also noted the rising values of the U.S. office markets for the quarter two of this year, reports PR Newswire. A total of 20.1 million square feet (msf) of office space was used in the second quarter of 2015, up 15.3 percent from the same quarter a year ago. DTZ tracked 80 metros, wherein 68 reported occupancy gains, while 12 reported occupancy losses.
Kevin Thorpe, DTZ's Chief Economist, Americas, says the stronger office sector trends mirror the stronger labor markets. "Net absorption is solid and picking up steam, which links directly to office-using job growth and is the strongest it has been in the current cycle," Mr. Thorpe said.
DTZ also identified the list of strongest markets in terms of high demand for office space and rent growth. According to DTZ studies, San Jose has the highest demand of office space with 3.8 msf, followed by Dallas and Oakland, with 1.5 msf and 1.4 msf respectively. In terms of rent growth, San Francisco posted a 13.8 percent year-over-year increase, Oakland is at the second spot with 8.6 percent and Orange County, CA. at third place, tracking 8.4 percent rental appreciation.
