REALTORS® office vacancy chart
In the second quarter of 2015, the Seattle metro area — which includes the urban areas in King and Snohomish counties — led the nation’s metro markets in in office rental rate annual increases. While Seattle’s office rental rate increases are high, they are not the only office market in the US seeing significant increases in their office rental rate increase. Here are the remaining top 10 with the highest annual Office Rental Rate increases.
- Seattle 7.2%
- San Francisco 6.3%
- San Jose 5.9%
- Dallas 5%
- Boston 4.8%
- New York 4.8%
- Orange County 4.8%
- Miami 3.9%
- Austin 3.8%
- Philadelphia 3.7%
Source: Reis via the Seattle Times
While these steep increases of the office rental rate for the top 10 markets are very sharp, thanks to declining supply, the rest of the office markets in the US are also seeing steady declines in the vacancy rates, as well. A recent report on office space rent by the National Association of REALTORS® confirmed that in the 2nd quarter of this year, office vacancies declined 65 basis points to 15.9 percent, compared with a year ago. This will lead to increases in the office rental rate generally throughout the US office markets.
For tenant’s this means it is better not to wait. Rents will be going up over at least the next year or two until more new construction comes on line. Even then, due to the cost of construction, rents will most likely not decline from the highs achieved. This is especially true in the more desirable office buildings in your market. So, don’t delay or you will see your office space costing even more than it does now.
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San Francisco and its surrounding counties continue to see an excellent office market. Current vacancy in San Francisco’s Downtown core ended the 3rd quarter at 6.6 percent while the tech corridors saw vacancy rates between 2.2 to 4%. This is leading to multiple offers on properties with continued raising rental rates. San Mateo county is seeing stronger activity towards the southern part of the county closest to Santa Clara County as tech firms are now looking north for better rental rate opportunities. San Mateo South has a 7.3% vacancy while the north county is 13%.
Pressure on traditional office tenants is becoming more apparent. Some notable larger firms have now pulled up stacks in San Francisco and moved to the east bay including Brown and Toland the the Research Center for Stem Cell Research both firms found in San Francisco.