Most Major Office Markets Hold Steady in First Quarter 2018

The Q1 2018 U.S. Top Office Metros Snapshot report shows that most major office markets in the U.S. held firm in Q1 2018. Changes in vacancy and rental levels were mostly marginal. 

Tenants continue to seek the newest, high-quality space to retain and attract the best talent and provide an optimal work environment. Pre-leasing of new construction is required to meet major requirements in most markets.

Coworking operators continue their aggressive expansions. WeWork signed leases for 200,000 square feet or more in Boston, Manhattan and San Francisco and took down space in several other markets.

Key takeaways from this report include:

  • The San Francisco Bay Area continues to lead the pack with the lowest vacancy rate and highest asking rents of our top 10 office metros. Silicon Valley continues to attract the tech giants. Facebook and Amazon leased a combined 1.8 million square feet in one project alone.
  • Manhattan has the second-highest asking rates and second-lowest vacancy rate among the top 10 markets. New construction scheduled for completion in 2018 is on track to be the highest since the 1980s. The shortage of large blocks is easing.
  • Boston has become the most dynamic market in the top 10 and landlords hold the stronger hand. Three major pre-leases were signed in Q1 2018 with more set to follow.
  • Far North Dallas’ heady construction cycle is ending after a series of major corporate campus developments with the last (for now) being delivered in the first quarter.
  • Supply-side concerns in Los Angeles have not abated. Several large projects are still available in both Downtown and West LA as the anticipated leasing traction has yet to emerge.
  • Chicago also has several major projects underway, only one of which is fully committed. Fulton Market, once considered a fringe location, continues to garner interest.
  • New supply continues to enter the Washington, D.C. market with 6.5 million square feet underway in the District alone. This majority of this space is set to deliver this year. Houston is still the most challenged market in the top 10 and had the largest increase in vacancy in the first quarter. Leases are set to start expiring on the surfeit of large sublease blocks formerly occupied by the energy sector.
  • Seattle saw its vacancy jump in Q1 2018 but is still one of the strongest markets in the top 10. Although there is significant construction activity underway, most projects are pre-committed.