Q4 2013 Colliers North American office report release


In Q4 2013, employment in the primary office-using sectors in the U.S. surpassed the pre-recession peak set in July 2007. Canada’s private sector continues to drive job growth and office demand.

The North American office vacancy rate decreased by 12 basis points to 13.56% in Q4 2013. The U.S. vacancy rate dropped below 14% for the first time since Q3 2008. The North American vacancy rate will likely continue to drop at a modest rate due to more efficient usage of space by tenants.The Canadian vacancy rate will likely increase slightly but remain low, with some tenants vacating older Class A and B buildings for newly completed space.

70 of the 87 markets tracked by Colliers posted positive absorption in 2013. Dallas led by a wide margin, followed by Houston, Central New Jersey, Boston and Atlanta. Absorption in the main intellectual capital, education and energy (ICEE) markets totaled nearly 20 million square feet, compared with 11.4 mil. sq. ft. in the main finance, insurance and real estate (FIRE) markets, although many FIRE markets, including Midtown Manhattan, Chicago, Charlotte and Miami, posted significant positive absorption during the year.

Construction activity increased slightly in 2013, but speculative construction remains concentrated in the strongest markets and submarkets. Houston alone accounts for about 12% of construction under way in the 87 markets tracked by Colliers, followed by Toronto, Calgary, Downtown Manhattan, Washington, DC and Midtown South Manhattan.

Office transaction volume totaled nearly $107 billion in 2013, the highest annual total since 2007. Given the shortage of available assets and/or rich pricing in gateway markets, as well as the broadening economic recovery, investor demand is spreading to secondary and tertiary markets that were out of favor earlier in the cycle. Transaction volume is poised to increase further in 2014 given improving fundamentals and the large amount of capital targeting real estate, including foreign sources.