US office vacancy rate rises marginally in 4Q 2019

Bengaluru, India

THE US office vacancy rate rose marginally to 16.8 per cent in the fourth quarter of 2019 from a year earlier, according to real estate research firm Reis. Of the 79 metropolitan areas covered by Reis, 24 showed an increase in vacancies in the quarter.

"Office occupancy growth was much stronger in the fourth quarter; however, three metros saw the lion's share of the growth: Chicago, New York and Dallas," according to the report.

New construction of office spaces fell to 12.5 million square feet from 14.7 million sq ft a year earlier.

The research firm, however, flagged concerns about office-space sharing company WeWork's occupancies as the company over-expanded and may need to reconsider some of its office leases, which could raise vacancies in a few metros.

WeWork's woes and escalating geopolitical tensions following the US strike in the Middle East could hurt the office market, Reis said.

Iran promised vengeance after a US air strike in Baghdad last Friday killed Qassem Soleimani, Tehran's most prominent military commander and the architect of its growing influence in the Middle East.

Reis said that net absorption, measured in terms of available office space sold in the market during a certain time period, rose 21 per cent to 12.2 million sq ft of office space in the quarter.

The average asking and effective rents rose 2.6 per cent and 2.7 per cent, respectively, from a year earlier.

"Job growth should stay positive in 2020 and continue to support occupancy growth in the office sector at a similarly tepid pace as in 2019," Reis said. REUTERS