Report: U.S. Office Sector Continues to Gain Momentum

The national office sector continues to grow after bottoming in the first quarter of 2010, with sales recovery spreading to secondary markets, according to ""Cassidy Turley"":http://www.cassidyturley.com, a commercial real estate services provider headquartered in Washington, D.C.
[IMAGE] The firm reports that net demand for U.S. office space improved during the October to December timeframe for the third straight quarter. Vacancy rates are down for the first time in more than three years, and rents are stabilizing.

""The sustained improvement in demand for space, now spreading beyond the largest metros, coupled with tightening vacancy is certainly encouraging,"" said Kevin Thorpe, Cassidy Turley's chief economist. ""However, the employment situation does not inspire robust projections for 2011.""

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Thorpe continued, ""The U.S. economy is on track to build on the growth in 2010, but the U.S. office sector is still a minimum of 18 months away from a balanced market.""

Cassidy Turley says the national office vacancy rate fell 10 basis points in Q4 to 16.7 percent. Average asking rents registered at $21.24, down 2 cents from the previous quarter. The report also revealed that 5.3 million square feet of new office space was delivered in the U.S. office market, and 30.3 million square feet were under construction, indicating two more years of limited new supply.

""Without further setbacks in the economic recovery, vacancy will continue to recede in 2011 and even more so in 2012,"" Thorpe said. ""Surging corporate profits remain the primary beacon of hope as they typically correlate with strong job creation several quarters later. If this relationship holds true in this cycle, the U.S. should see better job creation by mid-2011.""

U.S. office sales also improved in 2010. According to Cassidy Turley, investors are focusing on core assets, but data reveals that demand is moving beyond major metro areas.

New listings in October and November more than doubled the pace from a year ago. Cassidy Turley said this suggests that investment sales are poised to extend this momentum in 2011.