When it comes to office vacancy rates, there is a great disparity in various metro regions across the country. On one hand you have Washington, D.C., buoyed by its stabilizing government presence, with a national low vacancy rate of 6.2 percent, according to Reis. On the other hand, the Dallas metro region is faced with more than a quarter of its space, 25.5 percent, being vacant due to several years of negative net absorption and the collapse of the region’s high-tech industry, according to Reis. While Reis reports there will be some modest improvement in the Dallas market, it projects persistent construction could push vacancy rates in D.C. to the 8 percent to 9 percent level by year-end 2003.
The overall average vacancy rate in the U.S. stands at 19 percent midway through 2003, according to Cushman and Wakefield, up from 18.2 percent at year-end 2002. Short-term forecasts show that trend is unlikely to change significantly.
“Looking into the second half of 2003, we believe that the office markets could post a modest increase in net absorption (which would be a change of pace from the past 2 1/2 years), but not enough to materially alter the vacancy rate,” according to a report released by Steve Sakwa, first vice president at Merrill Lynch. “Assuming demand begins to resume a normal growth rate in 2004 and no new projects are started, we project it will take until 2008 before the nation’s vacancy rate approaches 10 percent, a level often viewed as a healthy equilibrium whereby landlords regain pricing power.”
| Highest
Office Vacancy Rates |
| Metro Region |
2Q Vac % |
1Q Vac % |
| Dallas |
25.5 |
24.9 |
| San Jose |
24.4 |
23.0 |
| Austin |
23.7 |
23.2 |
| Raleigh-Durham |
21.5 |
21.7 |
| Columbus |
21.4 |
21.8 |
| San Francisco |
21.3 |
21.4 |
| Denver |
20.8 |
20.2 |
| Phoenix |
20.3 |
20.9 |
| Atlanta |
19.8 |
19.5 |
| Boston |
19.6 |
18.4 |
| Memphis |
19.2 |
18.8 |
| Jacksonville |
19.1 |
19.1 |
| Minneapolis |
19.0 |
18.7 |
| Cleveland |
18.5 |
18.3 |
| Kansas City |
18.5 |
18.3 |
| Chicago |
18.4 |
18.1 |
| Detroit |
18.2 |
18.3 |
| Indianapolis |
18.2 |
18.1 |
| Pittsburgh |
18.0 |
18.0 |
| Fort Lauderdale |
17.9 |
18.3 |
| Source:
Reis |
| Lowest
Office Vacancy Rates |
| Metro Region |
2Q
Vac % |
1Q
Vac % |
| Washington, D.C. |
6.2 |
6.6 |
| New York |
9.7 |
9.6 |
| San Bernardino |
10.6 |
10.3 |
| Suburban Maryland |
11.6 |
11.6 |
| Richmond |
12.0 |
11.5 |
| Norfolk |
12.3 |
12.7 |
| Sacramento |
12.6 |
12.4 |
| Philadelphia |
12.8 |
12.6 |
| San Diego |
13.1 |
12.9 |
| Baltimore |
13.3 |
12.8 |
| New Orleans |
14.4 |
14.8 |
| Palm Beach |
14.8 |
14.3 |
| Suburban Virginia |
15.1 |
14.9 |
| Oakland-East Bay |
15.1 |
14.5 |
| Milwaukee |
15.3 |
15.1 |
| Los Angeles |
15.5 |
15.5 |
| Tampa-St. Petersburg |
15.6 |
15.8 |
| Nashville |
15.6 |
15.6 |
| Miami |
15.7 |
15.0 |
| Orlando |
15.9 |
16.1 |
| Source:
Reis |
