An Analysis by Victor Calanog, PhD
IT WAS GOING TO BE JUST ANOTHER SLOW YEAR
Vacancies ticked up slightly over the next couple of months, ending February at 16.9%, but vacancies had been on a measured upward crawl since 2016. This was by no means a sign of distress – only that property fundamentals had not really recovered at a robust pace since the Great Recession ended in June 2009. For a variety of reasons related to slow economic growth (+2.2% per annum on average for almost eleven years) and the changing nature of demand for office space, the office sector really did not experience the kind of blistering improvement in fundamentals that property types like multifamily and industrial did.
Office Net Absorption & Vacancy
Source: Moody’s Analytics REIS
A modest amount of new space came online in the first quarter – just 2.66 million SF – and net absorption fell by 2.7 million SF, pushing the national vacancy rate up to 17.0%, a 20 basis point increase relative to the end of 2019. Asking and effective rents both rose by 0.4%.
Victor Calanog, PhD CRE® is the Head of Commercial Real Estate Economics at Moody’s Analytics REIS. He and his team of economists and analysts are responsible for the firm’s market forecasting, valuation, and real estate portfolio analytics services. He holds a PhD in Applied Economics and Management Science, trained by a dissertation committee composed of faculty from the Wharton School of the University of Pennsylvania and Harvard Business School.