Steady Improvement in Industrial Market, with Miami’s Vacancy Rate Dropping to 8.1%
Los Angeles — September 24, 2013 — Office vacancy rates continued to decline in most major U.S. markets during Q3 2013, based on preliminary data from CBRE Group, Inc. Eight of the 13 largest markets showed lower office vacancy, led by Dallas, which experienced a 100 basis points (bps) decline to 18.1%. The U.S. industrial market also continued to show improvement in Q3 2013 according to CBRE, with demand coming from third party logistic companies, the food service sector, home construction, automotive and automotive suppliers. Miami maintained its 3rd place position among the top U.S. industrial markets, with a 8.1% vacancy in Q3 2013, down 10 bps from Q2 2013.
“Despite rising interest rates and continued weak growth overseas, the U.S. office market continued to benefit from slow but steady job growth and limited new office development, which has allowed moderate leasing demand to cut the supply of excess space. Meanwhile the U.S. industrial market benefited from consumer and business spending, a recovering housing market and increased demand for logistics space tied to the growth of e-commerce during Q3 2013,” said Brook Scott, CBRE’s Interim Head of Research, Americas.
“Miami’s industrial market continues to be one of top three markets in the country as a result of our strong international trade ties and significant investment in South Florida’s transportation infrastructure,” added Mary Jo Eaton, Executive Managing Director, CBRE Florida.
The Dallas office market’s strong performance was driven by demand from the professional services sector including insurance, IT and financial services firms. Professional services and healthcare also drove a 40 bps decline in both Phoenix and Washington, D.C. which reported 23.5% and 14.0% vacancy rates, respectively. Boston had the largest increase in vacancy, at 50 bps, due to a few large blocks of space becoming vacant. While U.S. employment growth was below expectations in August and revised downward in June and July, the professional and business services sector added 614,000 jobs over the past 12 months. Eight major office markets reported no new office space deliveries during the third quarter and the vast majority of markets reported an upward trend in rents. Ten projects in Houston delivered 1.6 million sq. ft. of office space during Q3 2013, the greatest amount of all major markets, 75% of which was pre-leased.
Industrial availability* continued to decline in many major U.S. industrial markets as well, with quarter-over-quarter basis availability rates decreasing in five of the 12 markets while five markets remained unchanged from the previous quarter. The largest availability rate decline was in Boston, with a 50 bps drop to 19.2%, followed by Dallas, down by 40 bps to 11.9%. Demand for space in Boston was driven by the food sector and warehouse and distribution needs in the 50,000 to 100,000 sq. ft. range. Demand in Dallas was mainly from third party logistic companies and e-commerce related companies. A common theme for most markets was a shortage of Class A space to meet burgeoning demand. Industrial rents have increased moderately in most markets and design build activity remained strong with speculative construction gaining momentum. In Chicago, there is currently 5.2 million sq. ft. under construction, including 2.2 million sq. ft. of speculative projects. In Dallas and Houston there is currently 10.1 and 7.8 million sq. ft. of new construction underway, respectively.
*Availability is space that is actively being marketed and available for tenant build-out within 12 months.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.