The number of office vacancies in the US will decline in 2013, but only slightly, according to a new report from the CBRE Group, Inc. The study showed that in the penultimate quarter of 2012, the office vacancy rate was 15.5 per cent, down 130 basis points from the Q2 2010 peak of 16.8 per cent. This fall is expected to continue into 2013, dropping to 14.9 per cent by the end of next year.
For those looking for a strong property investment opportunity, this is good news, with competition from prime office real estate looking set to continue in 2014, when vacancies are set to fall to 13.8 per cent. Arthur Jones, senior managing economist at CBRE econometric advisors, stated: "Although concerns remain about the recovery in the face of headwinds both at home and abroad, we have seen consistent improvement in broader markets and believe that the economy is slowly gaining traction. Businesses remain healthy and continue to hire and we have seen significant improvement in the housing market, which should provide the impetus for stronger growth by the middle of 2013."
While economic uncertainty has caused businesses to pull back somewhat over recent years, this is beginning to change as the US economy gains momentum. Although office-using employment is below pre-recession levels, the gap is starting to narrow, according to the CBRE. The organisation expects the sector to recover by 2013, which will drive office demand further. This will allow investors to demand higher rents and it is expected that average rents will increase by 3.5 per cent in 2013, before rising to 4.4 per cent rent growth in 2014.
Mr Jones explained that office rents are tied to the success of the economy and the employment market as a whole. Once these two factors are back on firm footing, investors can expect to see much more activity in office-based segments, specifically those driven by technology and energy. The CBRE claims that over the next two years, there will be a strong concentration of high-tech firms emerging in cities such as Austin, Boston and San Francisco, resulting in solid rent growth.