CBRE Econometric Advisors Forecasts 15.7% Vacancy Rate in 2012; Drop to 14.8% by End of 2013
Boston, MA – November 9, 2011 – (RealEstateRama) –– The U.S. office market vacancy rate is expected to decline modestly next year, falling to 15.7% by the end of 2012, according to a new analysis from CBRE Econometric Advisors (CBRE-EA). CBRE-EA forecasts that the office vacancy decline will accelerate in the following year and fall to 14.8% by the end of 2013.
“Although concerns of renewed economic downturn remain, we view the slowdown of the past few months as a temporary setback and feel that growth will improve by this time next year,” said Arthur Jones, Senior Managing Economist, CBRE-EA. “Healthy corporate balance sheets, record profitability and sustained consumer demand suggest that the economic recovery will strengthen by mid-2012 and, as a result, office market fundamentals will continue to improve slowly throughout the year.”
The office vacancy rate in Q3 2011 was 16.2%, down 60 basis points (bps) from its peak of 16.8% in Q2 2010. CBRE-EA notes that uncertainty has led businesses to pull back somewhat from their expansion plans in the near-term, and office-using employment is still well below its pre-recession peak; both are weighing on the commercial real estate recovery.
As a result, CBRE-EA projects that rent growth will remain subdued at 2.5% for 2012, before accelerating to 5.2% growth in 2013, fueled by more economic growth.
“Although rents have reached their lows in most markets and are slowly starting to reverse course, sustained improvement will not be evident until 2013. At that point, the job market recovery should create enough demand to more rapidly improve office occupancy,” added Mr. Jones.
CBRE-EA forecasts that over the short term, the top performing office markets will be weighted toward large “gateway” and high-tech markets. Over the next two years, gateway cities such as Boston, New York and San Francisco will be among the top-performing markets for rent growth. Markets with high-tech concentrations, such as Austin, Dallas, Pittsburgh and Salt Lake City that are well-positioned to take advantage of the economic recovery are also expected to be among the top 10 rent growth performers over a two-year horizon.
To speak with Mr. Jones or another CBRE-EA expert, please contact Robert McGrath (212.984.8267 or ).
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2010 revenue). The Company has approximately 31,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.
Robert McGrath 212.984.8267