Continued economic growth, coupled with a moderate amount of new inventory, bodes well for the health of a number of major office markets in the U.S. during 2007, according to a recent report released by the research unit of global real estate services provider Newmark.
Entitled “U.S. Office Property Sector: Market Outlook - Continued Gains in 2007,” the report provides an overview of office market fundamentals in what are called “substantial regional office property markets.” Virtually all of these markets enjoyed some improvement during 2006, the report notes, a trend which is likely to continue next year - with an important caveat.
“We anticipate that many regional office property markets in the U.S. will continue to experience improving conditions in 2007,” said Newmark research and real estate strategies executive managing director Peter Kozel. “But the critical element in this forecast is the moderate amount of inventory that will be added next year in a number of the better-performing markets.”
“Better-performing markets” which will not experience significant increases in new space include New York, Chicago, and San Francisco. While these markets have enough new space coming on line to slow the rapid escalation of lease rates they have experienced lately, “Unless the broader economy slips into a period of actual or near-recession, rents will likely remain firm since occupancy rates are, in general, at solid levels,” according to Kozel.
In other major office markets, Washington D.C. will continue to do well in terms of leasing and absorption next year - but with ten million square feet of space under construction, vacancy rates will not decline from current levels, according to the report. Atlanta’s office-based-employment base is enjoying solid growth, but at least five million square feet of space is under construction, limiting the amount of decline in the vacancy rate. Demand will outstrip new supply in Houston in 2007; meanwhile, Southern California markets “continue to move ahead,” said Kozel, “even though the official employment numbers do not show explosive growth.”
New York-headquartered Newmark and London-based partner Knight Frank operate from over 140 offices in established and emerging property markets on six continents. Last year, transactions were valued at over $41 billion with annual revenues of over $545 million. With a combined staff of 4,500, this major force in real estate is meeting the local and global needs of owners, tenants, investors and developers worldwide. For further information, visit www.newmarkkf.com.