U.S. Office Occupancy Still at Peak Levels but Absorption and Sales Slow

As highlighted in Colliers’ Q1 2018 U.S. Office Market Outlook, the U.S. office market showed continued strength in Q1 2018. The office occupancy rate has remained near its cyclical peak for nine successive quarters and rents showed an uptick in the first quarter. The market remains on very solid ground although absorption and sales volume have fallen.

Economic growth in 2018 is expected to be the strongest in three years. But with unemployment at historic lows, the available pool of workers is shrinking, so job growth is slowing, particularly in office-using sectors.

Office leasing continues to ease outside of the tech sector. Indeed, just four leading tech markets (San Francisco-San Jose, Seattle, Raleigh-Durham and Austin) account for 87% of net absorption this year. Otherwise, most businesses are seeking to limit their real estate footprint.

Office construction rose in Q1 2018 to its highest quarterly total in over nine years, but much of the new supply is focused on a few high-demand markets, limiting widespread supply concerns. Indeed, firms continue to pay up for the newest, high-quality space as they seek to attract and retain the best talent and provide the optimum work environment.

As tenants vacate their current premises, this presents an opportunity to reposition such assets and increase rents through more efficient floorplans. Nonetheless, tenant improvement allowances are rising faster than rents in a competitive leasing environment.


For more details on the latest office market trends, download the Q1 2018 U.S. Office Market Outlook Report. Be sure to also explore the Q1 2018 update to Your Market Insights Hub | U.S. Office, which presents the latest data and forecasts in a detailed, interactive format — including a new metro map feature.