Office Rental Rates Predicted to Increase by 5.6% by End of 2015

Lawrence Yun, the chief economist at the National Association of Realtors recently reported that the “Growth in commercial real estate sectors continues at a moderate pace from a very slow pace of absorption, despite job additions to the economy. Companies appear hesitant to add new space.”

The good news is that the pace of the recovery in the commercial sector and, in particular, office space is continuing to improve.

His predictions related to the Office Markets include:

Office Space Vacancy rates should decline from an expected 15.8 percent in the first quarter of this year to 15.6 percent in the first quarter of 2015.

Office rental rates are projected to increase 2.3 percent in 2014 and 3.2 percent next year or a compounded 5.6% by the end of 2015 compared with current office rental rates. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is likely to total 44.6 million square feet this year and 50.0 million in 2015.

The markets with the lowest office vacancy rates presently (in the first quarter) are

  • New York City, with a vacancy rate of 9.5 percent
  • Washington, D.C., at 10.2 percent; Little Rock, Ark., 11.6 percent
  • Birmingham, Ala., 12.7 percent
  • San Francisco and Nashville, Tenn., at 12.8 percent each


Find office space for lease, rent or purchaseBy: James Osgood