ICEE Office Markets are still Hot

by CoyDavidson on February 25, 2013

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North American Office Highlights Q4-12

During 2012, two-thirds of the 10 North American MSAs with the greatest absorption are characterized as ICEE markets (Intellectual Capital, Energy and Education). We see this trend continuing in 2013 as technology, energy and knowledge gateway centers remain the dominant generators of office-related employment.

2012 Office Absorption (Top 10 Markets)

  1. Houston- 4.50 MSF (ICEE)
  2. Dallas – 2.90 MSF (ICEE)
  3. Atlanta – 2.80 MSF (ICEE)
  4. Detroit – 2.75 MSF
  5. Chicago – 2.70 MSF
  6. Calgary – 2.50 MSF (ICEE)
  7. Phoenix – 2.40 MSF
  8. Boston – 2.20 MSF (ICEE)
  9. Philadelphia – 2.20 MSF (ICEE)
  10. Seattle – 2.20 MSF  (ICEE)

The North American and U.S. office vacancy rates declined further during Q4 2012 to 14.09% and 14.63%, respectively. This was the fourth consecutive quarter of improvement for the 6.4 billion square feet of inventory in the 85 North American office markets tracked by Colliers.

office chart

Key Takeaways

  • The market uncertainty and volatility of 2H 2012 inhibited neither office leasing or transaction activity. Q4 North American net absorption of 21.1 MSF was more than double Q3’s 10.4 MSF. 2012 total net absorption was 50.7 MSF (roughly the office inventory of Ft. Lauderdale), the best since the 2008–2009 financial crisis.
  • Major office property transactions totaled $77.6 billion in 2012, and surged at year-end 2012. Q4’s $29.1 billion in office building sales surpassed all prior quarters in 2012, according to Real Capital Analytics.
  • Capital is migrating out of the risk curve for investment in office building assets in search of yield. This trend, reported by Colliers in previous 2012 reports, was corroborated by the recent Association of Foreign Investors in Real Estate report in which four of the top five markets for investment were in the U.S., including Houston for the first time.
  • Medical Office has been a sleeper office sub-property type that saw a 30% growth in transaction activity in CY 2012 to $6.1 billion, or just shy of the 10% total $77.6 billion in CY 2012 office property sales. And, approximately half of the 71 MSF of office space under construction in the U.S. at the onset of 2013 is for medical-related use.
  • Recovery in housing is an overlooked office demand driver that will gain additional traction in 2013.

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