National MarketingThe Office Market May Be Turning a Corner
GlobeSt., February 4, 2022
There’s some good news for the office market, according to Transwestern. In the company’s 2021 Q4 review, there was quarterly office absorption of 644,000 square feet, which the company described as “turning a corner,” as “33 out of 51 tracked markets registered positive net absorption as market correction is underway.”
The five areas with the biggest increases in net absorption were in Boston, San Jose-Silicon Valley, Dallas-Fort Worth, Seattle, and Charlotte. When looking at trailing four-quarter net absorption, the top five were Austin, Raleigh-Durham, San Jose-Silicon Valley, Oklahoma City, and Nashville. About 30% of the markets that Transwestern tracks showed positive net absorption over the previous 12 months.
Seattle, San Jose-Silicon Valley, Charlotte, Austin, Salt Lake City and Raleigh-Durham had all been experiencing an expansionary trend, meaning positive net absorption percentage of office space before the pandemic.
The December job numbers were up 199,000, with about a quarter of them being office-using jobs. That segment of employment was up 1% to 46.8 million, so the number of people potentially needing someplace to work is on the rise.
But there are still strains evident on office space. For one, there’s still an ongoing recovery that has taken wind out of the sails of the market from both the ongoing pandemic with new variants, people and businesses still adjusting to broader working from home, and macroeconomic factors like inflation and supply chain issues pushing up property values but also imposing greater costs on companies.
The Q4 national average vacancy rate crept up 10 basis points to hit 12.6%. That includes demographic shifts from north to south, which means that there is likely some duplication in office space as new units are built to house the shifting companies without necessarily having someone to backfill the old space.
There were 152.7 million sq. ft. under construction in the quarter, which was up 3.1% quarter over quarter, but down 9.1% year over year. That would seem likely due to uncertainty about the market and the large amount of space already available. Why build more when so much could be had?
The asking base rent saw 2.1% annual growth to $25.72 per sq. ft., below the five-year average of 3.3%. Some traditional powerhouses were hit. “The largest, densest and most developed markets have historically commanded significantly higher rental rates, yet pandemic-related trends have diminished these markets’ lead,” the report read. “Since the beginning of the pandemic, the two most expensive markets, San Francisco and New York, have experienced the largest declines in rental rates at -19% and -9% respectively.”
According to Transwestern, “Markets with strong tailwinds prior to the pandemic may be better positioned coming out of the downturn” when looking at three-year net absorption percentage of stock.
Dayton’s Project Lands Third Office Tenant
Twin Cities Business, February 28, 2022
Another U.K.-based company is setting up an office in the Dayton’s Project in downtown Minneapolis. On Monday, the Dayton’s Project announced that London-based consumer goods giant Unilever has signed a lease for a 13,445-square-foot office on the eighth floor of the building.
Houston Methodist to break ground on new 400-bed hospital in Cypress
Houston Chronicle, February 18, 2022
Houston Methodist is preparing to break ground on a 400-bed hospital campus in Cypress to meet the growing demand for health care in the suburbs of far northwest Houston.
PODCAST: How Office Owners Are Trying To Make Us Fall In Love With The Workplace Again
Bisnow, February 13, 2022
The nation’s office owners are engaged in a serious courtship right now, hoping to woo the most important people in their life: their tenants.
Rising Online Grocery Sales Power Investment in Cold Storage Facilities
Wealth Management, February 2, 2022
The pandemic and the concurrent increase in demand for grocery deliveries have pushed up the need for cold storage. Now, this trend is changing the calculations surrounding the development of cold storage projects.
