Tech, finance companies continued to drive demand
Demand for US office space continued to be strong in the third quarter of 2018 with stable leasing volumes, rising asking rents, and solid absorption.
The quarterly update on the market from Cushman & Wakefield shows that the tech and finance sectors remained dominant with tech accounting for 27% of the quarter’s large leases; and tech taking 17% of the top leases.
The tightest markets all have strong tech demand - San Francisco with a vacancy rate of 6.8%; Puget Sound, Wash. (7.0%); Midtown South Manhattan (7.4%); Raleigh/Durham,NC (7.4%); and Charlotte,NC (7.5%)
Midtown South posted the highest asking rent nationwide at $76.42 psf, slightly higher than $76.12 psf in Midtown. San Francisco at $74.72 psf; Downtown Manhattan at $63.72 psf; and San Mateo, Calif., at $57.98 were the next three highest. Asking rents exceeded $50 psf in only one other market: Washington, DC, at $54.41.
Market in good health
“The US office market continues to be in good health,” said Revathi Greenwood, Cushman & Wakefield Head of Americas Research. “While we see some indicators decelerating, demand remains robust, especially in the West and in the tech sector. We predict this momentum will carry over into 2019.”
There was a rise in new supply, although the pace eased in Q3 2018 to 9.7 msf – roughly half the 18.1 msf delivered in the previous quarter.
Cushman & Wakefield is tracking approximately 114.0 msf of space currently under construction, up from 107.6 msf in the second quarter and the largest volume the firm has ever recorded. Midtown Manhattan is leading with 15.9 msf under construction, far exceeding the 5.9 msf of second-placed Silicon Valley.
“Even with the increase in supply, office markets remain healthy,” said Ken McCarthy, Principal Economist and Americas Head of Applied Research at Cushman & Wakefield. “Most of the new construction is taking place in tech-driven markets or in markets where demand growth has been strong. This growth is helping meet occupiers’ demands for modern workplaces and heightened efficiency, and is reshaping skylines across the country.”
