Colliers International’s Q3 2016 U.S. Office Report reveals that third quarter office market fundamentals continued the positive momentum of the first half of 2016, particularly in terms of net absorption amid renewed GDP growth.
Robust office leasing in the third quarter should set the table for a solid year-end figure, as the fourth quarter has historically been strong for absorption. While the rate of occupancy gains is slowing as many businesses increasingly focus on efficiency, the U.S. office vacancy rate has a strong chance of matching or dipping below the prior cycle low by early 2017.
- U.S. GDP growth rebounded to 2.9 percent in the third quarter, marking the strongest quarter in two years. The U.S. economy added an average of 206,000 jobs per month in Q3 2016, up 41 percent from Q2 2016.
- Class A asking rents ended the third quarter averaging $46.54 per square foot in central business districts (CBDs) and $28.91 in the suburbs, representing gains from Q3 2015.
- The national vacancy rate dropped to 12.4 percent, down 10 basis points from Q2 2016 and down 40 basis points from Q3 2015. Positive net absorption continues to be driven by “New Tech” companies.
- Net absorption reached 20.6 million square feet in Q3—nearly equal to the 23.8 million square feet absorbed in the first and second quarters combined.
- Third quarter sales volume in the U.S. was down 4 percent from Q3 2015 to $33.9 billion, though the pace of decline is slowing from earlier in the year. While major and tertiary markets saw sales volume declines, secondary markets saw a 3 percent year-over-year increase.
For more details on the latest office trends, download the Q3 2016 U.S. Office Report.