CoStar Insights

National Trends 17Q1 Office Market Results: First Vacancy Increase Since 2010

by Walter Page | Apr 19, 2017

1000 Fulton in Chicago

As forecasted, office vacancy rates notched a 0.1% rise to 10.3% in 17Q1, which is noteworthy since this was the first quarterly increase since 2010. The slight rise was somewhat expected, as the market pushed some scheduled 2016 completions into the first quarter. In total, nationally 22 million SF of office space completed in the first quarter, versus 12 million SF of net absorption.

In comparison, first quarter completions were up by 57% from a year earlier, consistent with our view that completions in 2017 will be up by about 50% over 2016 levels. Office net absorption of 12 million SF in 17Q1 was up 20% from year-earlier levels, with annual completions running at an 85 million SF pace, down from the 104 million SF cycle peak in 2015.

We expect that 2017 will continue to support about 80 million SF to 90 million SF of net absorption, but by 2021 forecasted net absorption is likely to be under 50 million SF, as slowing working-age population growth resulting from retiring Baby Boomers impacts growth in office jobs.


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