U.S. OFFICE LEASING ACTIVITY REBOUNDS FOR STRONG CLOSE TO 2013
Contact: Glenn LaFollette
(312) 470 1843
FOR IMMEDIATE RELEASE
U.S. Office Leasing Activity Rebounds for Strong Close to 2013
NEW YORK – Jan. 22, 2014 – New leasing activity in U.S. office markets rebounded in the fourth quarter of 2013 with 19.5 million square feet of activity, the highest quarterly jump in a year, according to Cushman & Wakefield’s fourth quarter statistics for the U.S. office market.
Overall leasing activity for the U.S Central Business District (CBD) office market totaled 68.1 million square feet for the year with an additional 137.8 million square feet of suburban activity, an increase of 5.9 million square feet from 2012. New York’s Midtown Manhattan office market paced the nation with 4.5 million square feet of leasing activity in the fourth quarter. Downtown Manhattan (1.8 million), Chicago (1.3 million), Boston (1.2 million) and San Francisco (1.2 million) each saw leasing activity surpass one million square feet of activity for the quarter.
Total leasing activity in San Francisco totaled two million square feet for the quarter, bringing year-to-date leasing up to 7.2 million square feet – a record leasing year for the market whose 10-year average was only 5.8 million square feet.
“The technology and the energy markets remain strong,” said Maria Sicola, Executive Managing Director and Head of Americas Research for C&W. “San Francisco, Boston, Houston and Denver are the markets that are seeing quite a bit of the activity and remain resilient. It’s a great start for those markets, but the other more pressing factor is going to be other industries recovering and expanding beyond technology and energy.”
Midtown Manhattan led the nation in overall leasing activity, with 16 million square feet of activity year-to-date. That total was 9.8 million more than Downtown Manhattan, which was second in C&W’s national rankings. Houston paced suburban markets with 13.9 million square feet of activity for 2013.
The overall vacancy rate for U.S. CBDs changed very little year-over-year, rising from 13.1 percent in the final quarter of 2012 to 13.5 percent in the fourth quarter of 2013. The quarterly change was even less, rising 0.1 percentage points from the third quarter of 2013. Overall, 17 U.S. CBDs saw a drop in vacancy for the quarter. The largest quarter-over-quarter declines were in Hartford, Conn. (down 7.03 percent), Phoenix (down 2.6 percent) and Silicon Valley (down 1.6 percent).
Overall rental rates averaged $41.74 per square foot for U.S. CBDs for the year – a seven percent increase of $2.79 from 2012. Quarter-over-quarter, national rental rates rose $0.77. Manhattan’s Midtown South market saw the highest quarterly change, leading the nation with $62.61 per square foot asking rents, a $2.27 change quarter-over-quarter. Downtown Manhattan was just behind it with a $2.26 change, totaling $48.26per square foot rental rate for the fourth quarter of 2013. Midtown Manhattan, Midtown South, San Francisco, Fairfield County, Conn., Washington D.C., Downtown Manhattan and Boston were the only U.S. CBDs to outpace the national rental rate average.
Overall absorption – the net change in occupied space – was positive year-over-year for U.S. CBDs, with 16 markets seeing positive overall absorption for the year. That gain was slim, however, with overall CBD absorption only totaling 437,844 square feet. Chicago (1.3 million) and Boston (1.1 million) saw the nation’s largest changes in CBD absorption.
“The absorption was very strong in the suburbs, while the CBDs struggled,” Ms. Sicola said. “Fortunately, there was a rebound, and it is a reflection of the national movement into our cities. We are seeing tenants that want to migrate into the CBDs. That’s mostly a core market phenomenon in places like Boston and San Francisco.”
Construction in U.S. CBDs saw 6.4 million square feet of completions in 2013 with two million of that total coming directly from Downtown Manhattan. Only six markets saw construction activity in their CBDs. An additional 12.8 million square feet is expected tobe completed over the next two years, with Downtown Manhattan seeing the most gain with three million square feet of construction expected in 2014. Silicon Valley’s suburban market will also see a surge in construction this year, with an additional three million square feet expect for completion.
HIGHEST AVERAGE ASKING RENTS (CBD)
Midtown South NY
San Francisco, CA
Fairfield County CT
Palm Beach, FL
LOWEST NATIONAL VACANCY RATES (CBD)
Midtown South NY
San Francisco, CA
About Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately‐held commercial real estate services firm. The company advises and represents clients on all aspects of property occupancy and investment, and has established a preeminent position in the world’s major markets, as evidenced by its frequent involvement in many of the most significant property leases, sales and management assignments. Founded in 1917, it has approximately 250 offices in 60 countries, employing more than 16,000 professionals. It offers a complete range of services for all property types, including leasing, sales and acquisitions, equity, debt and structured finance, corporate finance and investment banking, corporate services, property management, facilities management, project management, consulting and appraisal. The firm has nearly $4 billion in assets under management globally. A recognized leader in local and global real estate research, the firm publishes its market information and studies online at www.cushmanwakefield.com/knowledge.