Based on preliminary quarterly results, the vacancy rate for CBRE EA’s Office Sum of Markets increased by 70 basis points (bps) to 13% during the second quarter of 2020, with rate increasing in suburban and downtown submarkets. Overall, in the most recent four-quarter period Sum of Markets vacancy rate increased by 80 bps, since the office sector still had a positive momentum in second half of 2019. Even with construction activity freezing in several large markets, the increase in vacancy can be partially attributed to the volume of new supply delivered over the past two quarters. Corresponding to the uptick in the Sum of Markets, vacancy increased in most U.S. office markets, rising in 50 of 63, declining in seven, and remaining unchanged in six. The downtown vacancy rate, based on preliminary estimates, increased by 80 bps to 11.4%, while suburban increased by 60 bps to 13.8%.

While most markets saw an increase in vacancy, the quarterly decline was recorded in Memphis (-120 bps), Minneapolis (-40 bps), San Jose (-30 bps), Wilmington, DE (-30 bps), Sacramento (-30 bps), San Antonio (-20 bps) and Riverside (-10 bps). In Albany, Columbus, Hartford, Honolulu, Richmond and Toledo, vacancy stayed unchanged from the previous quarter. Despite the recent uptick, over the past four quarters we have observed tightening vacancy in many mid-tier markets across the U.S., including Memphis, Sacramento, Trenton, Las Vegas, Norfolk, Honolulu, Minneapolis, Richmond, St. Louis, San Antonio, Riverside, Pittsburgh, Tampa, San Jose, Cleveland, Cincinnati, Philadelphia, Louisville, and Milwaukee. During the first wave of the COVID-19 pandemic, the tech and research markets continued to record the nation’s lowest vacancy rates. These markets include Seattle (7.6%), San Francisco (8.0%), Raleigh (8.2%), San Jose (8.7%), Austin (9.1%), New York (9.2%) and Boston (9.6%).

Among the markets that had vacancy rate increases in Q2 2020, Orlando and San Francisco each recorded the highest increase (220 bps). Salt Lake City, Denver, Nashville, Oakland, Austin, Chicago and Stamford reported rate increases of at least 120 bps. As of Q2 2020, the nation’s highest vacancy rates were in Houston (22.6%), Dallas (19.4%), Fort Worth (18.6%) Albuquerque (18.5%) and Hartford (18.3%). Year over year, vacancy rates were higher in 44 markets including Stamford, Oklahoma City, San Francisco, Nashville, Orlando, Denver, Oakland, Austin, Fort Worth, Chicago, Charlotte, Houston, Boston, Dallas, Washington, D.C., Phoenix, San Diego, Salt Lake City, Miami, Portland, Seattle, Los Angeles and Detroit.

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