A new report from Yardi Matrix shows that the U.S. office market is continuing its strong performance into 2019. The February report, released March 7, found that asking rents rose by 0.5% in the three months ending in January. The increase was driven by job growth, which creates demand for additional office space.
Key takeaways of the report include:
- Nearly 170 million square feet of office space was under construction in February, representing 2.9% of existing inventory.
- Inventory growth is generally concentrated in coastal markets such as New York City and San Francisco, as well as in rapidly growing metros such as Austin, Nashville and Charlotte.
- Projects in the development pipeline will add another 6.7% to inventory.
- Nationwide, asking rents averaged $36.23 per square foot in January, up 0.45% over three months. Manhattan ($74.33), San Francisco ($58.75) and Brooklyn ($47.86) have the highest asking rents.
- The national vacancy rate increased to 14.1%, up 10 basis points from December.
- Office-using employment, which drives demand for office space, outpaced overall job gains as the current cycle nears the 10-year mark. Office-using employment nationwide grew more than 2% year-over-year in December.
- Transaction activity has remained steady, with interest rates remaining low and ample capital available for investment. Monthly sales volume over the past three months averaged about $7 billion.
- Sales transactions were almost evenly split between CBDs and suburban areas over the past three months.
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