Marcus & Millichap

Office Outlook

Summer, 2016

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National Office Sector Displaying Vigor as Vacancy Trends Lower;
Positive Employment Trends and Limited Development Buoy Investors

Confidence in the near-term economic outlook has sustained growth in office-using employment, triggering tenant expansions and the creation of new office-based businesses. Since office-using payrolls surpassed their prior peak in 2013, the rate of growth has accelerated and captured a broader swath of metros. In the near term, the office sector is poised for future gains. Vacancy rates in many metros are still above the averages posted this century while construction remain restrained.

Existing buildings continue to fulfill space demands generated by expanding tenants as construction remains low by historical standards, especially at this point of an economic expansion. Projected completions nationwide this year continue the recent trend of light development. Metros with significant scheduled deliveries include Dallas/ Fort Worth and Houston as well as San Francisco and San Jose, where tight vacancies and rising rents enable many projects to become feasible.

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