Healthy leasing and absorption helped offset rising new construction deliveries and kept office markets stable in 2017. Technology-focused markets were among the best performers during the year as that sector continued to expand.
Leasing and Absorption Healthy in 2017: New leasing activity in the U.S. office sector totaled 313.0 million square feet (msf) in the 87 markets tracked by Cushman & Wakefield for 2017, an increase of 9.7% from 2016 levels. The increase was broad based. The volume of new leases increased by more than 1.0 msf in 17 markets, while leasing volume declined by 1.0 msf or more in only four. Healthy new leasing volume was an important reason that a solid 49.1 msf of space was absorbed last year, down only slightly from the roughly 53 msf absorbed in 2016. This is significant especially in light of the continuing trend toward increased space efficiency and densification.
Technology Dominates, as National Markets Stabilize: Technology continued to drive demand. While the highest leasing volumes were in large markets like Santa Clara (Silicon Valley), New York, Dallas, Chicago and Los Angeles, when looking at leasing relative to inventory, technology-driven markets top the list. San Francisco—with an inventory of approximately 78 msf—registered total new leasing volume of 8.7 msf in 2017. That means slightly more than 11% of the market’s total inventory saw a new lease signed last year, the highest proportion in the nation. Nine of the 10 largest leases signed in San Francisco came from tech sector tenants last year. Other markets with large shares of new leasing activity included the tech-dominated cities of San Mateo (total leasing was 11.0% of total inventory), Seattle (10.5%) and Santa Clara (10.4%). These markets all had at least eight of their top 10 leases from tech-related tenants.
Source : Cushman & Wakefield