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Office Vacancy Increased in Q1 2020

Based on preliminary quarterly results , the vacancy rate for CBRE EA’s Office Sum of Markets increased by 20 bps to 12.3% during the first quarter of 2020, with suburban and downtown submarket rates increasing. Overall, in the most recent four-quarter period, the Sum of Markets vacancy rate remained unchanged thanks to positive momentum in 2019. Year-over-year stability in vacancy is even more prominent considering the large volume of new supply delivered in the past year and tenants’ more efficient use of office space. Despite the Sum of Markets uptick, vacancy continued to fall or stayed flat in more than half of U.S. office markets, declining in 32 of 63, rising in 23, and remaining unchanged in eight. The downtown vacancy rate, based on preliminary estimates, increased by 30 bps to 10.6%, while suburban increased by 10 bps to 13.2%.

The largest quarterly declines in vacancy were recorded in Norfolk (-100 bps), Newark (-80 bps), Philadelphia (-70 bps), and Tucson (-70 bps). Sacramento, Ventura, Portland, Riverside, Cleveland, Detroit, Indianapolis, Oakland and Trenton each declined by 50 bps or more. Over the past four quarters, we have observed tightening vacancy in a variety of markets across U.S. regions, including Trenton, Las Vegas, Norfolk, Memphis, Louisville, Sacramento, San Jose, Honolulu, Philadelphia, Miami, Los Angeles, Tampa, Richmond, Albuquerque, Orange County, Cincinnati, Milwaukee and Pittsburgh. Tech and Research markets continued to record the nation’s lowest vacancy rates including San Francisco (5.8%), Seattle (7.1%), Raleigh (7.4%), Austin (7.9%), New York (8.7%), Boston (9.0%) and San Jose (9.0%).

Among the markets with vacancy rate increases in Q1 2020, Tulsa recorded the highest (160 bps) increase in vacancy. San Diego, Stamford, Nashville, Honolulu, Columbus, Fort Lauderdale, Austin, Washington, D.C., San Francisco, Orlando, Wilmington, DE, San Antonio, Long Island and Houston reported rate increases of at least 50 bps. As of Q1 2020, the nation’s highest vacancy rates were in Houston (21.9%), Dallas (18.5%), Albuquerque (18.3%) and Minneapolis (18.3%). Among these, Dallas and Albuquerque maintained high rates while registering vacancy decline versus a year earlier. Year-over-year, vacancy rates were higher in 22 markets including Oklahoma City, Stamford, Nashville, West Palm Beach, Hartford, Wilmington DE, Columbus, Indianapolis, Oakland, Denver, Long Island, San Francisco, Toledo, Albany, San Diego, Kansas City and Houston.

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