Economy Watch: Office Vacancy Down in Most Markets But Up Overall

CBRE Group's latest quarterly office market report shows that while the national vacancy rate edged up in 2016, it still remains at its lowest level since 2008.

Van Buren Office Park, Herndon, Va.

Vacancy in the U.S. office market edged up by 10 basis points during the first quarter of 2016, rising to 13.2 percent, according to the latest quarterly report (released Monday) on the market by CBRE Group Inc. Even with the increase, the national office vacancy rate remains at its lowest level since 2008.

The overall national office vacancy rate has fallen 70 basis points over the past four quarters. Also, despite the slight Q1 increase, vacancy continued to improve in most places, with rates falling in 33 U.S. markets, rising in 25, and remaining unchanged in five. Suburban vacancy remained at 14.7 percent, while downtown vacancy increased by 10 bps, to 10.4 percent.

The small rise in the national vacancy rate was fueled by significant new supply in some markets, such as Boston, Washington D.C., Dallas and Orange County. Not only that, Washington had negative office space absorption and Dallas only modest absorption, trailing this new supply.

On the other hand, Detroit recorded one of the largest quarterly declines in vacancy, 130 basis points, while Nashville, Tenn., Louisville, Ky., Columbus, Ohio, Cleveland, Milwaukee, San Diego and Seattle all declined by 60 basis or more. Overall, markets in California and the Southeast saw the greatest improvement in the last four quarters. Among these were San Jose, Calif. Nashville, Oakland, Calif., Detroit, Jacksonville, Miss., Orlando and Atlanta.

According to CBRE, the nation’s lowest office vacancy rates in Q1 2016 were in San Francisco (6.3 percent), Nashville (6.6 percent), Austin, Texas (7.7 percent), Albany, N.Y. (8 percent), San Jose and Raleigh, N.C. (8.7 percent).