by Calculated Risk on 3/29/2018 11:25:00 AM

Reis released their Q1 2018 Office Vacancy survey this morning. Reis reported that the office vacancy rate increased to 16.5% in Q1, from 16.4% in Q4 2017. This is up from 16.3% in Q1 2017, and down from the cycle peak of 17.6%.

From Reis Economist Barbara Denham:

Defying a healthy job market, the office vacancy rate increased in the first quarter to 16.5%, up from 16.4% at year-end 2017 and 16.3% in the first quarter of 2017. The vacancy rate has increased 30 basis points from a low of 16.2% in Q4 2016.

The national average asking rent increased 0.8% in the first quarter while effective rents, which net out landlord concessions, increased 0.9%. At $32.87 and $26.67 per square foot, respectively, the average market and effective rents have both increased 2.2% from the first quarter of 2017.

Net absorption was 6.2 million square feet, which was above the average quarterly absorption level of 2017: 5.9 million square feet. Construction was also higher than average: 10.9 million square feet, above 10.6 million square feet per quarter in 2017. Moreover, the first quarter tends to see the lowest activity; thus, this was a relatively strong quarter given the Nor’easters that plagued the Northeast.
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Moreover, the market seemed to have stagnated in 2017 as companies had put off making office leasing decisions until a fiscal stimulus was passed. The passing of the Tax Reform and Jobs Act should deliver higher profits and stronger business confidence which should spur stronger office leasing this year.

Click on graph for larger image.

This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

Reis reported the vacancy rate was at 16.5% in Q1.  The office vacancy rate has been mostly moving sideways at an elevated level, but has increased a little recently.

Office vacancy data courtesy of Reis.