Washington, D.C. Office Space Most Expensive in U.S.
Washington, D.C. topped New York City for the highest office rents in the country crown last quarter, according to a report from commercial real estate firm Cassidy Turley.
The average rent in the nation's capital in for the third quarter was $48.96 per square foot, compared to $48.53 in New York City. Rents in D.C. rose 3.9 percent compared to a year ago, while New York rents were down 5.6 percent in the same period. Rents rose in 21 of the 80 markets tracked, with Minneapolis rising the most, up 6 percent, reaching $24.09 per square foot. The cheapest rent in the report: $12.17 per square foot in Wichita, Kansas.
Nationally, average office rents last quarter were down 1.8 percent from last year to $21.25. This is down just 10 cents from the second quarter of this year. "This is consistent with our baseline forecast that projects rents to remain essentially flat for the next 12 to 18 months," says the report.
The office vacancy rate nationwide stayed at 16.8 percent, though demand for space improved, with 7.4 million square feet of office space absorbed. This was the second straight quarter of improving demand. The report predicts that – based on historical absorption rates – the market won't return to its average vacancy rate of 14.1 percent before 2013.
"Labor markets remain lackluster, but other leading metrics such as rising corporate profits and temporary service hiring suggest more significant job creation and greater office space demand are in the pipeline," said Cassidy Turley chief economist Kevin Thorpe.
Thorpe added: "Rents always lag the recovery. Even with a pickup in the economy, the office market is facing a severe oversupply problem left over from the recession."
New York City topped the space demand list, with 3 million square feet more space occupied in the third quarter. (For the year so far, the Big Apple has absorbed 8.9 million square feet – "a pace that rivals the demand that occurred during the real estate boom period of 2004 and 2005," notes the report.)
Washington, D.C. absorbed 1.4 million square feet – the second-highest quarterly gain for D.C. on record. The bulk of the net gain was thanks to the federal government: The Securities and Exchange Commission signed a lease for nearly 1 million square feet of net growth.
The Dallas-Fort Worth metro area also posted a big gain: 1.3 million square feet, which the report noted is helped by a rebounding global tech sector. Other metro areas with notable gains: Charlotte (618,000 square feet), Baltimore (585,000), suburban Virginia (514,000), Miami (419,000) and Nashville (306,000).
Inc. contributing editor Courtney Rubin was for five years a London-based staff writer for People magazine. Rubin, a former senior writer for Washingtonian magazine, has written for the New York Times magazine, Time, Marie Claire, and other publications. She is the author of The Weight-Loss Diaries.