According to CoStar, the average U.S. vacancy rate decreased to 11.4 percent in the 2nd quarter of this year. However, many office markets are flourishing while others are stagnant. So, which areas are over-performing and which are under-performing?
Booming cities such as Houston, New York, Atlanta, Boston, and Denver are overflowing with technology, healthcare, and energy companies, and plenty of millennials to work for them.
Conversely, office markets with slow growth and stubbornly high vacancy like Detroit, New Jersey, and West Palm Beach are under-performing because companies have left those markets due to many years of public policy unfriendly to business and/or a demographic draw of young talent and nimble enterprises elsewhere. The New York suburban markets such as Long Island, Westchester and Fairfield Counties are experiencing stabile vacancy but dropping rental rates for the same reasons. These under-performing suburban markets are still favorable to tenants as landlords are aggressively reducing rental rates and giving long concession periods to attract tenants.
However, the over-performing markets, such as Houston, San Francisco, Pittsburgh, and Portland are experiencing rising rental rates and shrinking improvement allowances & concession periods. Houston is leading the charge for over-performing markets because of the demand created by it’s energy industry. They now have nearly 18 million square feet of office space under construction; 67 percent of which is pre-leased or built-to-suit for users.
Fortunately for Long Island companies, great opportunities are still available. Take advantage of this market by contacting Ross Selinger, a Tenant Rep specialist in under-performing markets.