What’s the secret to a strong office market? Acording to the latest research by Cushman & Wakefield, a high number of tech companies might be the key.
Cushman & Wakefield recently released its fourth quarter office report. Of the 87 office markets tracked in this report, those with the greatest amount of tech companies stood among the year’s best performers in leasing activity, vacancy levels and absorption.
Overall, new office leasing rose 9.7 percent in 2017, with the country seeing a total of 312 million square feet of new office space leased during the year. Chicago was one of the busier office markets in the country, with 11.6 million square feet leased in 2017.
Ken McCarthy, principal economist with Cushman & Wakefield, summarized the driving force behind many of these office leases: “Tech is king,” he said. “The top leasing markets are a veritable who’s who of technology centers.”
Cities with strong technology sectors also saw the lowest office vacancy rates as 2017 came to a close, according to Cushman & Wakefield’s report. The national office vacancy rate, though, remained flat, ending the year at 13.2 percent. The 13.5 million square feet of new office space delivered to the market in the fourth quarter matched almost exactly the office absorption of 13.8 million square feet.
McCarthy, though, said that there are signs of improvement in the office market. During the fourth quarter, the overall office vacancy rate fell on a year-over-year basis in 52 of the 87 markets tracked by Cushman & Wakefield. That is an improvement over the third quarter, when 48 markets recorded year-over-year dips in office vacancy rates.
Cushman & Wakefield found, too, that new office construction might be in the early stages of a slowdown. About 54 million square feet of new office construction was completed last year. The end-of-the-year pipeline, though, declined to 102.9 million square feet, the smallest that figure has been in nearly two years. An additional 69.5 million square feet of new office construction is set to be delivered in 2018, marking the first decline in new construction completions since 2011, according to Cushman & Wakefield.