Following a jittery Q1, here's what to expect from U.S. office markets for the rest of 2016
Outlooks leading into the new year called for optimism and stability, but further drops in oil prices, increasing global economic uncertainty and a resulting stock market decline shifted the global mindset to one of caution. As a result, office market momentum slowed moderately as occupiers more carefully considered expansionary plans.
By the end of the first quarter, though, market fundamentals proved steady with supply and demand moving in lock-step. In short, our outlook for the year remains positive.
Here are five key trends to watch across office markets in 2016:
- At 143.8 million, employment is at its highest level ever recorded and as a result, occupancy growth is expected to continue into 2017.
- Leasing activity remains dominated by technology and financial services.
- Despite employment growth, the U.S. development pipeline of 96.8 m.s.f. is lower than previous peaks, and should keep supply balanced in most markets once growth begins to cool.
- Asking rents increased at the highest rate thus far in the cycle—up 3.2 percent in Q1. We expect this to continue, especially in high-demand, low-supply secondary and tertiary markets.
- Investors are more seriously eyeing strong secondary markets, largely due to their strengthening fundamentals, as well as high barriers to entry in primary markets.
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