by Dan Rafter
The first quarter of the year wasn’t a great one for the U.S. office market if you’re looking solely at net absorption. But when it comes to rents, the the office market’s performance looks a lot better.
DTZ recently released its look at the office market’s performance during the first quarter of 2015. While absorption was down, office rents did rise in more than 70 percent of the country.
According to DTZ, U.S. office markets absorbed 10.6 million square feet of space in the first quarter of the year. That’s down 5 percent from the first quarter in 2014.
Despite that bit of a slowdown, the U.S. office market has seen positive net absorption for 20 straight quarters. And the office vacancy rate tightened by 10 basis points from the last quarter of 2014, falling to 14.4 percent in the first quarter of this year.
Out of the 80 metropolitan areas that DTZ tracks, 60 reported occupancy gains in their office markets. Only 20 reported occupancy losses.
Kevin Thorpe, DTZ’s chief economist, said that the slowdown in absorption was not a surprise. He pointed to seasonal factors as the reason behind this dip in absorption. Thorpe said that absorption levels have been weakest during the first quarter of the year for six straight years.
“The weakness is simply a function of weather, budget cycles and other seasonal data quirks,” Thorpe said in a written statement. “It has never amounted to a sustained downtrend.”
U.S. office rents jumped 2.3 percent in the first quarter of this year when compared to the same time period in 2014. That is the strongest quarterly gain since 2008. Office rents rose in 73 percent of the country.
At the same time, developers are building more new office space. DTZ reported that in the first quarter there was 98.5 million square feet of new office construction. That is up 51 percent compared to the same quarter one year ago.