North American Office Highlights – 3Q 2011
U.S. office markets posted another quarter of modest growth with slightly stronger demand and a modest drop in vacancy. The much-anticipated recovery in the U.S. office market, however, remained largely absent, with many businesses reluctant to commit to more space given the uncertainty in both the domestic and global economies. With only modest economic growth and uneven employment gains, the outlook for the U.S. office space market is far from certain, which means rents are unlikely to show any appreciable change for at least the next twelve months.
By comparison, Canadian markets enjoyed a reasonably good quarter on the back of a slightly more upbeat economy and a comparatively buoyant job market. Going forward, both the U.S. and Canadian economies are expected to remain sluggish by historic standards, with little prospect of any material change in light of the global macroeconomic backdrop. Given the uncertainty surrounding the European sovereign debt crisis and the accompanying stresses in the banking sector, demand for office space is highly unlikely to increase from levels experienced in the last few quarters. The U.S. economy should escape a double-dip recession, but growth is anticipated to remain in the 1.0 to 2.0 percent range.
Based on year-to-date gains in occupied space, San Francisco (including the San Francisco Peninsula) is a clear standout among the nation’s office markets, but a number of others are seeing reasonably good gains in occupancy, including Charleston, Charlotte, Dallas–Ft. Worth, Houston, New York, Orange County, San Diego, San Jose, Seattle and Washington, DC. Also somewhat positive is the nineteen-month-long gain in private-sector employment, averaging 136,000 jobs per month. Furthermore office-using employment was relatively robust during the July-September period, with professional and business employment in particular up 3.4 percent year-over-year (September).
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