In this brief video, Reis Chief Economist & VP of Research Victor Calanog provides his assessment of Q2 2017 Office Sector trends. Highlights include:
- Not much happening in the office property sector this past quarter
- Vacancies were unchanged at 16.0% versus the prior quarter and down a mere 10 basis points year over year
- Vacancies peaked in Q3 2010 at 17.6%, since have only descended 160 basis points in 7 years
- In previous cycle, office property vacancies peaked at 17% in 2002 or so, declined to 12.5%, a more than 500 basis point decline, before next recession hit in 2008 or so
- Asking and effective rents grew .4% and .5%, respectively, in the quarter,1.6% for both asking and effective year over year, essentially in line with GDP growth
- Not a lot of new construction
- Would be hard pressed to find financing without significant pre-leasing commitments
- Lackluster results not a surprise with modest 2.1% GDP growth from 2009 to 2015, slowing to 1.6% in 2016
- 2017 GDP growth remains to be seen, but pundits are scaling back expectations from 3% plus to slightly above 2%
- Without economic growth and corresponding job growth not going to see much action in office sector
- Without much new supply, expect a a slow equilibrium of progress for rents and vacancies