Suburban Office is Ready to Rally

  • February 13, 2017
  • Posts from Friends

It seems that downtown office space has been the primary focus of investors, buyers, sellers and other commercial real estate professionals in the industry. While downtown office development has been the spotlight, suburban office space has been pushed toward the back burner. Although, according to recent data and our friends at View The Space, suburban office development is starting to play a major role in the growth and recovery of the office sector of commercial real estate. Read the blog post from View The Space below to learn more, then click the green button at the bottom of the page to view the full article.

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Suburban Office is Ready to Rally

Downtowns may be grabbing most of the headlines lately, but the suburbs are now doing more of the heavy lifting to push the office recovery forward.

Suburban office markets slipped quietly to the background in the past several years, while downtowns commanded the spotlight with mega-millions spent on projects ranging from public parks and mass transit to sports stadiums and high-rise condos. That revitalization has helped to attract both people and employers back to the urban core. But the latest office data supports the notion that the suburbs are not only alive and well, they are playing a bigger role in the office market recovery.

U.S. office vacancies improved a further 10 basis points during the fourth quarter to reach 12.9% at year-end, which is the lowest level since Q1 2008, according to CBRE. That decline was due entirely to improvement in the suburban market. During 2016, the suburban vacancy rate declined 14.1%, while the downtown vacancy rate increased by 40 basis points.

Clearly, the suburbs are still trailing downtown markets in overall occupancies. However, the momentum appears to be shifting. The downtowns are reporting slowing absorption and rent growth, while both absorption and rents are on the rise in the majority of suburban markets. According to CBRE, the top five suburban markets with the lowest vacancy rates include:

  • Cambridge – 3.8%
  • Nashville – 4.7%
  • San Jose – 7.2%
  • Walnut Creek/I-680 Corridor – 7.8%
  • Charlotte & San Francisco (tie) – 7.9%

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