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BOSTON - Cushman & Wakefield released first quarter statistics for the U.S. commercial real estate market that show Boston experiencing a slight decrease in office vacancy to 7.4 percent, from 7.5 percent at the end of 2007. The overall office vacancy rate in Boston's Central Business District remains at a seven year low which is the fourth lowest vacancy rate in the nation. Boston is the only market among the five largest to experience a decline in vacancy quarter over quarter. Average asking rents in Boston reached $46.80 per square foot, up from $46.30 at the end of last year.
The top five cities with the lowest vacancy rates in the nation remained unchanged, led by Bellevue, Wash., at 5.7 percent; New York at 6.1 percent; Washington, D.C., at 7.3 percent; Boston at 7.4 percent; and San Francisco at 8.0 percent.
During the first quarter of 2008, the national office vacancy rate rose to 9.9 percent from 9.7 percent.
Despite the modest increase overall, half of the 12 largest U.S. markets
continued to see vacancy rates decline through the first quarter. The
six major markets that experienced vacancy declines were Dallas, to 28.7
percent from 30.3 percent; Los Angeles, to 13.5 percent from 13.9
percent; Seattle, to 8.4 percent from 8.8 percent; Philadelphia, to 9.4
percent from 9.7 percent; Minneapolis, to 17 percent from 17.2 percent;
and Boston, to 7.4 percent from 7.5 percent.
The rise in vacancy coincides with a slight decline in overall office
leasing activity, which totaled 17.5 million square feet in the first
quarter of 2008, compared to 18.1 million square feet in the first
quarter of last year. Average asking rents, on the other hand,
continued to rise, reaching $37.69 per square foot at the end of the
quarter, compared with $36.26 at the end of last year.
The largest vacancy rate drops of all U.S. markets were in Dallas (1.6
percentage points), Silicon Valley, Calif. (1.0 percentage point),
Portland, Ore. and New Haven, Conn. (0.5 percentage point), Los Angeles,
Seattle and Westchester County, N.Y. (0.4 percentage point).
Maria Sicola, executive managing director and head of Research for
Cushman & Wakefield, stated that despite the slower leasing environment,
the U.S. market has held relatively steady and some markets continue to
tighten, which she credits to limited new construction in recent years
in most major markets. "We are facing economic issues that could impact
demand for the next six to nine months, but it's important to point out
that the market is coming off recent highs and is well positioned on the
supply side for the near-term."
Ms. Sicola added "the combination of three straight months of employment
declines and broad economic uncertainty caused a mild slowdown in
leasing activity in the first quarter."
Top Five Largest Market Summaries
- New York City: The New York City office market has remained relatively
steady during the first few months of 2008, although leasing activity
declined. Overall rents reached a record average of $67.10 per square
foot, the highest in the nation, with class-A average rents in Midtown
reaching $79.78 per square foot. However, while still low, vacancy rates
are creeping up. The overall Manhattan vacancy rate - the second lowest
in the nation behind only Bellevue, Wash. - is now 6.1 percent, up from
5.7 percent at the end of 2007.
- Chicago: The Chicago central business district recorded negative
absorption for the first time in two years, meaning more space was added
to the market as available space than was removed from the market
through leasing. The vacancy rate remained relatively flat during the
quarter, at 12 percent, up from 11.9 percent at the end of the year.
Rents rose modestly to $30.06 from $29.61 during the same time period.
- Washington D.C.: The District of Columbia office market vacancy
remained the third lowest in the nation at the end of the quarter,
increasing only slightly to 7.3 percent from 7.1 percent at yearend.
The presence of the federal government provides long-term stability
needed for jobs and economic activity, and has helped boost rents to
$48.47 at the end of the quarter, up from $48.13. New construction
completions during the quarter added roughly 303,000 square feet of
office space to the market.
- Boston: The Boston office vacancy rate remains at a seven year low of
7.4 percent, down from 7.5 percent at the end of 2007. This represents
the fourth lowest vacancy rate in the nation. Boston is the only market
among the five largest to experience a decline in vacancy quarter over
quarter. Average asking rents reached $46.80 per square foot, up from
$46.30 at the end of last year.
- San Francisco: The San Francisco office market vacancy remained the
fifth lowest in the nation at the end of the first quarter, holding
steady quarter over quarter at 8 percent. The direct vacancy rate
declined slightly, offset by an equal increase in sublease space.
Average asking rents reached $47.11, the third highest in the nation, up
from $45.33 at the end of last year. New construction activity
completed during the quarter added approximately 322,000 square feet of
office space to the market, the most of any office market in the nation
year-to-date.
Lowest National Vacancy Rates: 1Q '08
VACANCY QUARTERLY CHANGE
1. Bellevue, Wash. 5.7% +0.6%
2. New York 6.1% +0.4%
3. Washington, D.C. 7.3% +0.2%
4. Boston 7.4% -0.1%
5. San Francisco 8.0% 0.0%
6. New Haven, Conn. 8.0% -0.5%
7. Seattle 8.4% -0.4%
8. Portland 8.9% -0.5%
9. Philadelphia 9.4% -0.3%
10. Denver 9.9% +1.3%
Highest Average Rents: 1Q '08
RENT QUARTERLY CHANGE
1. New York $67.13 +$2.05
2. Washington, D.C. $48.47 +$0.34
3. San Francisco $47.11 +$1.78
4. Boston $46.80 +$0.50
5. Palm Beach, Fla. $39.92 +$1.06
6. Bellevue, Wash. $36.85 +$0.58
7. Los Angeles $36.24 +$1.39
8. Westchester, N.Y. $34.31 +$0.14
9. Ft. Lauderdale, Fla. $34.22 +$1.09
10. Orange County, CA $34.12 -$0.95 | 
