Why Office Rents are Accelerating…

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The rebounding office space market is worth watching, as vacancies fall and rents rise, I noted in February 2015. “The strong demand suggests that occupiers have gradually slowed the trend of shrinking square foot-per-employee office footprints, and the shadow supply of empty office space left over from the Great Recession is diminishing as growth moves forward at a very strong clip.” The opportunities are endless, as I noted. There was no shortage of opportunity.

So it’s no surprise to learn that tenant demand rebounded strongly in Q2 2015 forcing rental rates to accelerate in more than 70% of the country, according to commercial real estate service firm, DTZ.

U.S. office markets absorbed more than 20 million sq. ft. of space in Q2 2015. That’s a 15.3% increase year over year, as demand for space outstrips development, noted the report. U.S. office rents were up 2.7% in Q2 2015 year over year. That’s the best quarterly report since 2008.

"Rent growth trends are clearly spreading to more geographic areas and are being driven mostly by strong demand trends in the CBDs," says Kevin Thorpe, DTZ’s chief economist, Americas. "Downtown areas in most U.S. cities are thriving right now, which is pushing rental rates up not only for high-quality class A space but across the board. Suburban office is still muddling through in most places, but the demand metrics in the CBDs are as robust as anything we have observed since the late 1990s."