Urban submarket concentration bucks historical trends
SANTA BARBARA, Calif., Oct. 31, 2019 – A new Yardi® Matrix report on the U.S. office property market illustrates two major trends in new office supply.
The report shows that new supply is heavily concentrated in a handful of metros. More than half is in the top 10 most active markets and almost 80% is in the top 20. Furthermore, new supply is increasingly concentrated in urban submarkets, contrary to historical trends. Before 2018, suburban properties constituted at least half of new deliveries every year since the financial crisis of 2007-08. “This trend will continue, as only 31.3% of square footage under construction is in suburban submarkets,” the report says.
Meanwhile, average U.S. office asking rates increased 1.4% year-over-year in September 2019, while national vacancy rates fell 10 basis points from the previous month. Expensive new listings drove increases in rate growth leaders San Francisco, Tampa, Fla., and Austin, Texas.
Office transaction activity totaled $63.5 billion through the first three quarters of the year, lagging 2018’s total for the same period by $3.9 billion, as low interest rates failed to spur higher sales volume in the third quarter. Job growth in office-using sectors continues to outpace the overall labor market.
More information about lease rate and occupancy trends, sales activity and office-using employment, including close-up looks at Brooklyn, N.Y., Phoenix and Austin, is available in the Yardi Matrix national office report for October 2019.
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