Economy Watch: Office Vacancies Continue Slow Decline

Suburban office markets set the pace for the decline in the national vacancy rate, according to new CBRE data. Mid-size Sun Belt markets have seen vacancy rates decline over the past year.

Jeffrey Havsy, Americas Chief Economist, CBRE
Jeffrey Havsy, Americas Chief Economist, CBRE

There was a little less vacant office space in the U.S. at the end of the third quarter, according to new data from CBRE. The national vacancy rate, according to the company, dropped 10 basis points (bps) quarter-over-quarter, down to 12.9 percent. Continuing a recent pattern, suburban office markets continued to set the pace for the decline.

The vacancy rate in suburban markets decreased 20 bps for the quarter, down to 14.1 percent, while downtown vacancy dropped to 10 bps to 10.6 percent. Vacancy continued to fall in a majority of U.S. metro office markets, and the national office vacancy rate remains near its post-recession low, CBRE noted.

Mid-size markets heat up

The largest metro area declines were in Trenton, N.J. (down 220 bps), Las Vegas (140 bps) and Phoenix (110 bps). Tucson, Detroit, Memphis, Stamford and Richmond each declined by 80 bps or more.

During the past four quarters, a vacancy tightening has been found in mid-sized markets in the Sun Belt. That includes Tucson, Las Vegas, Albuquerque, Louisville, Orlando, Richmond, Detroit, Sacramento, Phoenix, Memphis and Jacksonville, the report said.

“The slow, steady improvement in the office market continued in the third quarter after a second quarter pause,” said Jeffrey Havsy, Americas’ chief economist for CBRE. “Demand remains positive but modest.”