With absorption rates continuing to meet the demand for office space in the U.S., 2019 is poised to be the tenth consecutive year of positive absorption.
Although there have been increased concerns about the U.S. economy in the last several months in part due to rising interest rates and trade agreements with other countries, many experts believe the office net absorption could continue to increase in the coming year, although at a slower pace than previous years.
Over the last couple of years, the U.S. has seen record low unemployment numbers going back fifty years, with the unemployment rate hitting as low as 3.7% last September. A slowdown in job creation is generally followed by a decreased demand for office space. However, with December’s 312,000 jobs added to the U.S. economy, dramatically outperforming analyst’s expectations of 177,000 new jobs for that month, and the unemployment rate maintaining a still near-record low 3.9 percent, there is hope in the coming year that the commercial real estate demand, particularly for the office sector, will continue to sustain absorption levels necessary to meet office space availability. Although many economists have been predicting a recession is eminent, the December jobs report has caused experts to concede that it will not happen anytime soon.
While the U. S. office vacancy rate has hovered around 13 percent over the last two years, rent rates have increased by only 1.3 percent over the past year. The good news is that the office sector demand and absorption levels for office space has kept pace with the booming construction levels. Medical office demand is expected to lead the way within the office sector in the coming year. Although the vacancy rate nationally is expected to rise moderately, the vacancy rates will remain below the 20-year average for the office sector.
Overall, the outlook for the 2019 commercial real estate market looks promising in part due to a healthy GDP, continuing job growth, increased foreign investments in U.S. commercial properties and stronger demographics, evidenced by over 1.4 million new households established in the U.S. in the past year, which has the effect of increasing demand for both residential and commercial real estate space.
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Sources:
https://www.bisnow.com
https://www.foxbusiness.com
https://www.cpexecutive.com
https://www.leggmason.com
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