Highlights of the Second Quarter 2013 Downtown Office Market include:
• The downtown market has seen an increase in demand for office space as shown in the steady decline in the vacancy rate from 4.2 percent to 4.0 percent since last quarter.
• Rental rates are effectively flat.
• There has been a marginal uptick in the number of sublets available.
• Quick absorption of new product in the downtown core has boosted developer confidence, resulting in the escalation in the number of developments moving into the construction phase before pre-leasing commitments reach the standard 60 percent. With roughly 5 million square feet of office space currently under construction in the downtown core and 17 projects in the planned/proposed phase, new supply could add a potential 14 million square feet to the downtown office inventory from 2015 to 2018.
Looking 12-18 months forward, we believe the marketplace will continue to remain tight, however, leasing activity is slowing and the sublet market is showing signs of activity. Tenant’s that are expanding or planning an office move should employ a thoughful strategic plan to contain occupancy costs. Considerations should include reviewing staff density within existing offices, a review of fixed operating costs charged by landlords and a relocation versus renewal plan that demonstrates the advantages of each scenario.
Please feel free to contact us for a detailed 2013 outlook to discuss your firms specific requirements.