There are certain cities in the US where the office market is beginning to show signs of recovery, while other areas are not performing as well. This is the finding of research published by Savills, which released four reports focusing on the San Francisco, Manhattan, Washington DC and Los Angeles office sectors. The Manhattan and San Francisco markets showed the most signs of improvement, with the former recording an increase in leasing activity in both the Midtown and Midtown South districts and flat vacancy rates in the second quarter of the year.
Although leasing activity was down in San Francisco, the vacancy rate for office space also dropped, with Savills going on to highlight the healthy jobs growth in the city - 35,000 new positions were added through June 2012. Investment volumes, while well below their peak, are also on the rise, the research revealed. By the end of this year, the firm expects sales volumes in this part of the property investment market to hit between USD 5 and 6 billion (GBP 3.1 to 3.7 billion), which would put it at its highest level since 2007.
Despite its popularity with international investors, however, Manhattan is not expected to see as much cash flow into its office sector as in previous years, largely due to the limited number of investment opportunities to come to market. Sales volumes also remain constrained in the Washington DC and Los Angeles office markets, Savills noted. In Washington DC, buyers are focused on core office locations and are not purchasing assets in more suburban areas. In Los Angeles, real estate investment in the sector is lagging behind other central business districts in the US. However, West Los Angeles is performing much better than the Downtown district, with leasing activity and rents both up and vacancy rates down in the former.
Savills also highlighted the strength of the tech and media sector, commenting that this industry has driven take-up of office space in Los Angeles and San Francisco, as well as being largely responsible for the positive jobs growth in San Francisco in the first half of this year.