As a follow-up to my blog last week, which offered a glimpse into our Mid-Year
2014 Canada, U.S Office Market Report, to be released next week, I would
like to turn to the U.S. now…
All but two U.S. markets recorded positive net absorption for the
12-month period ending June 30, 2014. The lack of construction and an uptick in
tenant demand resulted in vacancy decreases for the majority of U.S. markets –
a trend we expect to see continue through year-end.
At mid-year 2014, the U.S. office vacancy rate was 13.5% compared with
14.4% a year earlier. Meanwhile, construction volume currently averages only
about 1.5% of the existing inventory base. However, four markets have
disproportionate shares of the nearly 60 msf underway in the U.S. – and
together represent 56% of the total square footage under construction.
Energy-driven Houston tops the chart with 13.7 msf, or more than 23% of the
U.S. construction total, while New York ranks second with 13%, or 7.7 msf.
Dallas and Washington, DC each account for roughly 10% of the total, with 5.5
and 5.9 msf, respectively, under construction.
On the investment side, international capital continues to prefer
American markets. To date, international buyers have invested more than $26
billion in 500-plus properties. This total compares favorably with 2013, when
nearly $37 billion was invested in roughly 900 properties during the year. Thus
far, Manhattan, Boston, Los Angeles, and Washington DC have been the top
destinations for international capital this year. And, according to Real
Capital Analytics, Canadian buyers remain the investment leader by far and, to
date, have purchased $7.5 billion worth of assets in 2014. Canadian capital has
also displayed a preference for Manhattan and Boston.
Please watch for my blog tomorrow on rents continue rising in London…
