Economy Watch: Tech Sector Driving Office Demand

So far in 2017, the top 10 cities for office absorption include several tech-focused markets, including Brooklyn, Seattle and Santa Clara, Calif., according to a new Cushman & Wakefield report.

Revathi Greenwood, Head of Research, Americas, Cushman & Wakefield
Revathi Greenwood, Head of Research, Americas, Cushman & Wakefield

The tech sector drove U.S. office fundamentals during the third quarter of 2017, according to Cushman & Wakefield’s recent report on the sector. Demand was strong enough in some markets to keep the national market stable during the past three months.

In 2016, Seattle was the only technology hub to rank in the top 10 cities for space absorption, said Cushman & Wakefield’s Revathi Greenwood, head of research, Americas. So far in 2017, the top 10 cities for office absorption included Santa Clara, Brooklyn, Seattle, Raleigh/Durham and San Diego—all tech-focused markets. Each has seen more than 1 million square feet of space absorption thus far, with Santa Clara reaching nearly 3.4 million square feet.

New office development

However, the strength of these and other top markets—including Midtown Manhattan and Dallas—was offset by negative absorption elsewhere. Out of the 87 markets tracked by Cushman & Wakefield, 27 markets posted a combined total of 5.3 million square feet of negative absorption during the third quarter, compared with 3.4 million square feet of negative absorption in the second quarter.

Cushman & Wakefield also tracks about 104 million square feet of new office development (representing 2 percent of total U.S. office inventory) in 87 markets across the U.S. That figure is down from nearly 109 million square feet at the end of the second quarter, but still marks the sixth consecutive quarter that the pipeline has exceeded 100 million square feet.

Markets with significant office square footage under construction include Midtown Manhattan (9.5 million square feet), Dallas/Fort Worth (6.3 million square feet), Washington, D.C. (5.3 million square feet), San Francisco (5.1 million square feet) and Boston (5 million square feet ).