US office vacancy: 1st rise in 5 years

BENGALURU • The United States office vacancy rate rose to 16.3 per cent in the fourth quarter of 2017, up from 16.1 per cent a year earlier, rising for the first time in at least five years, according to real estate research firm Reis Inc.

Asking and effective rents increased 0.6 per cent in the quarter, compared with the third quarter, registering the highest quarterly growth rate in six quarters. Rent growth was 1.8 per cent for 2017.

"The year-end numbers showed a consistent deceleration in occupancy but somewhat higher rent and employment growth than in previous quarters," said Ms Barbara Denham, senior economist at Reis, in a statement. "We expect this trend to continue at the start of 2018 as more office construction is expected to come on line."

Ms Denham believes businesses may feel renewed confidence in 2018 as the recently passed tax Bill should return more profits to their bottom lines. "This could foster more robust leasing activity. Rent growth will likely increase as well, but we are not likely to see an impact until late 2018 or so," she said.

Net absorption, which is measured in terms of available office space sold in the market during a certain time period, plummeted about 60 per cent to 5.21 million square feet in the fourth quarter, compared with a year earlier.

Construction activity slowed, with about 7 million sq ft of new office construction completed during the quarter, compared with 10.7 million sq ft a year earlier.

REUTERS

A version of this article appeared in the print edition of The Straits Times on January 04, 2018, with the headline 'US office vacancy: 1st rise in 5 years'. Print Edition | Subscribe