US Office Absorption Hits New Low
As the pandemic drags on throughout the third quarter of 2020, Dallas is in the top 10 markets facing big challenges. Nationwide, U.S. office absorption hit a new low.
The pandemic continues to impact this sector of the market. The full list of top 10 markets suffering includes Manhattan, Washington DC, Chicago, Dallas, Houston, Los Angeles, Atlanta, Seattle, and Boston according to a new report released by Collier. There were 37.1 million square feet of negative absorption in the entire US. These 10 markets combined accounted for 15.7 million of that total.
Negative absorption over the past six months stands at a cumulative 49.7 million square feet. Already more than half of the 92.4 million square feet seen during the GFC(Global Financial Crises of Q1 2009), which spanned eight quarters. Dependent on the length and severity of the current market downturn, the GFC total could be surpassed within the next few quarters.
Also noted in the Colliers report, vacancy increased at a rate not seen for over 10 years. Contributing to this was a growing amount of sublease space. There is now 168.8 million square feet of sublease space available in the U.S. This is a significant increase over the previous high of 143.3 million sf reported in Q2 of 2009. There has been a combined 35.5% increase in the volume of sublease space on the market over the past six months. This takes the national sublease availability rate to 1.5%, the highest on record.
For tenants needing office space, this could all be good news. With the supply of sublease space growing, the first signs of declining rent rates are beginning to show. Average Class-A asking rates fell 2.7% in the third quarter.
Looking to the future, this report believes there will likely be little chance for a turnaround during the next twelve months. Many companies have delayed their return to the office until Q3 2021 and some companies may stick with the remote work model indefinitely.
Do you currently have a property with higher than normal vacancies? The team at Kurz Group can help you assess the taxable value of your asset.