Demand for office space surged in the fourth quarter of 2012 despite economic uncertainty related to the fiscal cliff, according to research by Washington, D.C.-based Cassidy Turley.
Cassidy Turley reports that U.S. office markets absorbed 20.1 million square feet in the fourth quarter, up from 7.1 million square feet in the third quarter, resulting in the strongest quarter of demand for office space since pre-recession 2007. Vacancy rates in the fourth quarter fell 40 basis points from the previous quarter, to 15.3%.
‘There clearly was pent-up demand forming in the office sector,’ says Kevin Thorpe, chief economist at Cassidy Turley. ‘The job numbers have been reasonably healthy for quite some time, but the office demand data have been largely disappointing.Â This report suggests the office sector is finally falling in line with the momentum we are observing in the rest of the economy.’ Â
In the fourth quarter, all four census regions in the U.S. recorded positive demand for office space and falling vacancy. Of the 80 metros Cassidy Turley tracked in the study, 65 reported gains in occupancy.
Phoenix and Boston led the national demand for office space, each with more than 1.2 million square feet of fourth-quarter net absorption, followed by Seattle, with 1.1 million square feet. San Francisco was the strongest market in terms of rent growth, with 14.5% year-over-year rent growth, followed by New York with 10.4% and Salt Lake City, at 10.3%.
‘Fourth-quarter results were impressive when you consider the worst-case scenario the fiscal cliff presented and the possibility of relapse into recession,’ Thorpe says. ‘Businesses generally don't expand into more space unless they feel confident in the economic trajectory.’