U.S. Office Market Outlook | Q1 2016

by CoyDavidson on May 25, 2016

US Office Market Outlook Colliers International q1 2016

Office Market Fundamentals Remain Positive to Start 2016

Colliers is pleased to release its Q1 2016 U.S. Office Market Outlook report. The report explores how a strong U.S. economy is contributing to job growth and increased demand for office space. It’s expected that the U.S. office market will continue to expand over the next couple of years. Vacancy rates continue to decline while absorption remains positive and Class A asking rents in both the CBD and suburban areas post healthy annual increases.


“The U.S. economy has continued its moderate growth while both occupancy and asking rents have continued to trend upwards,” said Cynthia Foster, President of National Office Services. “There is still room for gains in many markets that have not yet matched or surpassed their prior peak in asking rent or trough in vacancy.”

In Q1 2016, economic indicators remained positive. Interest rates have remained low, the extreme volatility in the financial and commodities markets has moderated and job creation continued a long streak of robust gains. Those solid results have translated to strong performance in the office sector. Vacancy rates continued to decline, absorption remained positive and Class A asking rents in both the CBD and suburban areas posted healthy annual increases.While sales volume decreased, pricing has remained elevated as the inventory of top quality assets available has diminished. While sales volume decreased, pricing has remained elevated as the inventory of top quality assets available has diminished.

Key Observations:

  • Though the year began with volatility in the financial markets, the strong employment numbers give reason for continued optimism. The U.S. is experiencing the longest consecutive string of monthly job gains on record, with an average of over 200,000 jobs added monthly for five consecutive years.
  •  The office market continued to strengthen in the first quarter as the national vacancy rate declined 10 basis points in the quarter to 12.6%, a full 100 basis points lower than a year ago. Most markets participated in the improvement, with 80% of metros registering stable or declining vacancies.
  • Absorption (9.5 MSF) moderated from the robust occupancy gains seen at year-end 2015, though it is in-line with historical first quarter numbers. The pace of absorption is expected to increase throughout 2016, though it may not reach the record totals seen in the past two years due to vacancy constraints.
  • Class A asking rents remain strong in both CBD ($46.19) and suburban ($28.96) areas of the U.S., posting gains of 8.9% and 3.7%, respectively, over the last year. The largest year-on-year gains were seen in the tech-centric San Francisco Bay area and Midtown South in Manhattan, as well as Atlanta and Dallas.

Click here to download the report as a PDF.

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