The nation’s commercial office market maintained its slow but steady recovery during the fourth quarter of 2012, according to data from real estate research firm Reis Inc., The Wall Street Journal reported Jan. 7.
The office sector has seen gradual expansion since the beginning of 2011, but growth has been moderate compared to what the office market typically sees in a strong economy.
Reis surveyed 79 metropolitan areas and found that asking rents for commercial space increased to an average $28.46 per square foot, which is a 0.8 percent increase for the quarter and 1.8 percent increase for the year. The amount of occupied office space grew by 3.7 million square feet during the quarter, pushing down the vacancy rate 0.1 percent to end the year at 17.1 percent, the Journal reported.
The amount of occupied office space grew by just 17.2 million square feet in 2012 — that is compared to 66.7 million square feet of expansion in 2005. In 2012, the vacancy rate was just 0.5 percentage points below the 17.6 percent post-recession high seen in the fall of 2010, well above the 12.5 percent at the market's peak in the fall of 2007.
The office market tends to track growth in the labor force, which added 155,000 jobs in December 2012, according to the U.S. Department of Labor, the Journal reported.
“Until that starts to escalate a little more, we're probably going to see more of the same,” Ryan Severino, an economist at Reis, told the Journal.
However, growth in office markets with quickly expanding technology and energy sectors has been modest to strong. Those cities and regions include Houston, New York and Northern California, the Journal reported.
Topping the list is San Francisco, where rents sought by commercial landlords increased 6.6 percent in 2012, according to Reis data. Markets in harder-hit areas like Las Vegas and Tucson, Ariz., saw office rents decline 0.5 percent in 2012.
Previously troubled areas such as Orange County, Calif., and Atlanta, have started to see vacancy rates decline, the Journal reported.