Los Angeles-based CBRE Group Inc., citing positive changes in the economy, is forecasting a moderate decline in the U.S. office market vacancy rate next year.
According to CBRE, the office market vacancy rate will fall to 14.9% by the end of 2013. However, improvement in the office market will begin to accelerate in 2014, with the vacancy rate expected to drop to 13.8% by the end of that year. As of the third quarter of this year, the office vacancy rate was 15.5%, down 130 basis points from its peak of 16.8% in the second quarter of 2010.
Furthermore, CBRE anticipates that office-based employment will have recovered to its pre-recession peak by the end of 2013, setting the stage for more substantial demand for office space. As a result, CBRE projects that average rents will increase by 3.5% in 2013, before accelerating to 4.4% rent growth in 2014.
‘Although concerns remain about the recovery in the face of headwinds both at home and abroad, we have seen consistent improvement in broader markets and believe that the economy is slowly gaining traction,’ says Arthur Jones, senior managing economist at CBRE Econometric Advisors. ‘Businesses remain healthy and continue to hire, and we have seen significant improvement in the housing market, which should provide the impetus for stronger growth by the middle of 2013. As a result, we expect office fundamentals to continue their slow, but steady, recovery throughout the next year.’
CBRE predicts that the top performing office markets will be driven by the technology and energy industries. Over the next two years, metro areas with strong concentrations of high-tech firms – including Austin, Boston and San Francisco – will experience solid rent growth, while markets that are home to energy-related industries – such as Dallas and Oklahoma City – will also be able to take advantage of the economic recovery.