Thanks to poor performances in some of its largest cities, the United States office leasing market had a slow first quarter, according to a national office market report released today by Jones Lang LaSalle.
Just about 1 million square feet of office space was absorbed nationwide in the first quarter, well below the 8.6 million square feet averaged over the previous six quarters. Net absorption fell by 2.2 million square feet in New York, Chicago and Washington D.C., with the latter recording 1.47 million square feet of negative absorption. Further, leasing activity in New York and Washington D.C. fell 43 percent quarter-over-quarter, the report says.
“The recovery slowed during the quarter,” John Sikaitis, JLL’s senior vice president of research, said. “Overall rents across most markets will grow, but at slow and measured paces unless some significant cushion of technology or energy pockets exist.”
Contrary to previous reports extolling Midtown South’s office market, Jones Lang LaSalle found that all of New York City’s absorption declines can be attributed to Midtown South, which recorded 480,629 square feet of negative net absorption. On the other hand, the submarket’s rents increased 8.2 percent, more than any market in the nation, to $50.76. Citywide, rents rose 1 percent to $56.65, compared to the national average of 0.5 percent and net absorption fell by about 140,000 square feet.
While the national office market was light on deals, there was expanded activity as tour velocity increased in 57.8 percent of markets. The tech sector spurred much of that activity as it did in New York City, Cushman & Wakefield said at a panel this morning.
Investment activity was mostly stable across the country, but more new product is on the weight as construction activity has increased 86.2 percent in the last six months. About 33.7 million square feet is on the verge of being delivered nationwide, with 8 million square feet coming from New York City — tops in the nation. — Adam Fusfeld