Driven this year by solid office demand growth in Sunbelt markets across the country, the national office occupancy rate is expected to increase into 2018 as such metros as Phoenix, Los Angeles, Atlanta and Miami enjoy net job growth in what’s already been one of the most drawn-out U.S. economic recoveries on record.
With slower than expected but steady job growth and muted levels of new construction, the U.S. vacancy rate involving the U.S. commercial real estate market – one that includes Philly office space, Philly retail space and Philly industrial space — fell to 10.5% in the third quarter from 10.9% a year ago. Net absorption of office space posted a robust 63 million square feet in the first three quarters of 2016, although down from 69 million square feet of absoprtion during the same period this year.
“The office market continues to do very well in the U.S. and Philadelphia commercial real estate markets and fundamentals are fairly strong,” noted Walter Page, a leading industry consultant.
This report on office demand growth, which including portions in relation to national and Philadelphia commercial properties, was made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.
“The vacancy rate,” Page said, speaking in general terms about U.S. and Philadelphia commercial real estate properties,” hit a business cycle low again in the third quarter, and while absorption is down it’s still a very solid number.”
Office-using employment the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space — grew at a strong 2.4% over the past year, and continues to outpace the broader jobs market by 20-30%. The recovery, while slow and lackluster compared with previous cycles, has served to lengthen one of the longer-length recoveries at nearly seven years.
Three of the top six strongest U.S. metros based on annual job growth, Dallas/Fort Worth, Phoenix and Atlanta, are neither tech or energy based markets, but diverse Sunbelt economies with lower housing and business costs, strong in-migration and readily available labor.
Other factors should continue to drive office absorption and prolong the staying power of the recovery, the report noted. For example, office construction levels remained below historical averages for several years before ramping up slightly in 2015. Further, slow but steady rent growth over the last five years among U.S. and Philadelphia commercial real estate listings means dramatic rent spikes experienced during peak cycles in 2006-07 and 1999-2000 won’t be as pronounced this time around, and could extend this recovery by several years.
For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) Leor Hemo (leor.hemo@wolfcre.com) or Lee Fein (lee.fein@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.
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