Average Asking Rent Up Despite Negative Net Absorption, Uptick in Vacancy
August 04, 2021
Houston – Second quarter job growth and a rise in tour activity signal that the U.S. office market may be moving toward stabilization, according to Transwestern’s most recent report. Despite the overall vacancy rate inching up to 12.6% and more than half of tracked markets increasing sublease inventory, the average asking rent increased to $25.39 per square foot, reflecting annual growth of 1.9%.
“Second quarter results indicate the office market is moving in the right direction, and if COVID-19 infections caused by the Delta variant are kept under control, we expect the third and fourth quarters to improve as tenants begin making space decisions,” said Elizabeth Norton, Senior Managing Director of Research Services at Transwestern. “Landlords have held rental rates relatively steady and used concessions to attract tenants; how and when these concessions dissipate is heavily dependent on local market supply and demand, potential health and safety restrictions, and overall economic conditions during the second half of the year.”
Nationally, net absorption registered negative 22.9 million square feet, a 57.4% improvement from the previous quarter’s negative 53.8 million square feet. Further, 75% of tracked markets experienced net absorption above their average quarterly net absorption over the past year. Notably, over the 12-month period, three markets – Raleigh-Durham, Nashville and Tampa – posted positive net absorption.
Despite supply chain disruptions on the construction industry, 24.4 million square feet of construction projects were delivered during the second quarter, the highest since the first quarter of 2020. Austin and Charlotte have particularly high under construction square footage as a percent of total stock to meet growing interest in these markets. Future vacancies will be contingent on how demand meets supply and at what rate demand absorbs vacant space.
Download the full second quarter 2021 U.S. office market report here.
About Transwestern Real Estate Services
Transwestern Real Estate Services (TRS) adds value for investors, owners and occupiers of all commercial property types through a comprehensive perspective and by providing solutions grounded in sound market intelligence. Part of the Transwestern companies, the firm applies a consultative approach to Agency Leasing, Asset Services, Tenant Advisory + Workplace Solutions, Capital Markets, and Research & Investment Analytics.
The privately held Transwestern companies have been delivering a higher level of personalized service and innovative real estate solutions since 1978. Through an integrated, customized approach that begins with good ideas, the firm drives value for clients across commercial real estate services, development, and investment management. Operating from 33 U.S. offices, Transwestern extends its platform capabilities globally through strategic alliance partners whose unique geographic, cultural, and business expertise fuels creative solutions. Learn more at transwestern.com and @Transwestern.
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