CoStar: 2015 Best US Office Year Since 2007

CoStar Group has released its State of the U.S. Office Market 2015 Review and Forecast, which reflects that U.S. office net absorption topped 100 million square feet for the first time since the Great Recession. With the office vacancy rate down from 11.3% in 2014 to 10.8% at the end of 2015, CoStar cites broadening demand and constrained levels of construction contributed to tightening space availability in virtually every metro area.

"The market is overwhelmingly strong at this point in the cycle. With the momentum in the market, I’m sure the next quarter will also be strong," said Hans Nordby, managing director of CoStar Portfolio Strategy, who presented the findings along with CoStar Director of Office Research Walter Page and Vice President and Research Director Dean Violagis.

Highlights from the report include:

— Vacancies declined in 64% of the nation’s office submarkets and 56% of metro office markets during the fourth quarter of 2015. CoStar analysts expect office vacancy to continue trending lower to approximately 10% in 2017.

— Annual net absorption of office space increased to 101 million square feet in 2015, compared with 93 million square feet in 2014, while developers delivered 64 million space feet, a 41% increase over the previous year. The amount of new space under construction, which has trended downward in the last couple of quarters, stood at 126 million square feet at year end, a modest 7% increase from a year ago, and near the historical yearly average since 2000.

— 2015's 4.4% annual rent growth topped the previous year’s growth of 3.8%, with rents surging at a particularly strong rate in CBDs such as San Francisco at 19.4% and Raleigh, NC at 13.9%. Even in the urban core of Atlanta and Detroit, rents in the urban core rose at 11.2% and 10.5%, respectively.

For more news and information visit Blumberg Partners.

Are Trophy Buildings Outpacing the Market?

JLL's 2015 Digital Skyline review was released this month, featuring JLL's proprietary market insights regarding office supply, demand, rents, leverage and investment into 47 markets across the United States and Canada, with the ability to compare and contrast individual markets or multiples of markets. According to the 2015 Digital Skyline, trophy buildings throughout Manhattan post below-market vacancy rates despite significant rent premiums.

"New York continues to attract both capital and talent from around the world, and this trend shows no sign of tapering off," said Tristan Ashby, JLL's vice president and director of research in New York, in a statement. "And while in an active phase, construction of new office space in Manhattan is lengthy, expensive and ultimately limited by available sites." According to the findings, although some trophy-quality space will be returning to the market, new product in Manhattan's most in-demand locations remains limited, with some opportunities several years away. High-end space in Midtown, in particular, has become increasingly hard to find. The chasm in vacancy rates is considerable: trophy-quality buildings in Midtown posted a vacancy rate of 8.4 percent in the first quarter of 2015 while the overall vacancy rate for Midtown assets stood at 10.0 percent.

To view the new JLL Digital Skyline interactive site, click here. For more news and information visit Blumberg Partners.

IRS Closing 43 Offices too Save $17M

In an attempt to cut costs, the IRS has announced that it will be closing 43 of its smaller offices over the next two years. The cost-cutting initiative is projected to save $17.2 million in annual rental costs in fiscal 2012 and $23.5 million in fiscal 2013. In addition to closing the smaller offices, the IRS will also consolidate multiple offices within the same commuting area and explore ways to "do more with existing space," like desk sharing and more telecommuting.

"Given today's tight budget environment, we have to be willing to make the tough but responsible calls to save taxpayer dollars," said IRS Commissioner Doug Shulman. "Cutting and consolidating our real estate is a responsible way we can save money. It's an important addition to our growing portfolio of cost-saving measures."

The IRS hasn't released a list of the offices to be closed but indicated that it would be those without taxpayer assistance centers and have fewer than 25 employees according to a Forbes article.

For more news and information visit Blumberg Capital Partners.

Austin Chamber of Commerce Buys $4.5M Office Space in Hilton

The Greater Austin Chamber of Commerce has purchased 20,000 square feet of office space for $4.5 million in the Austin Hilton Hotel according to an Austin Business Journal article. The space, previously occupied by Faulkner USA, will house 45 employees currently at 210 Barton Springs where the Chamber's lease expires next year. The Chamber will move to the Hilton at 500 E. Fourth St. this coming March.

"The Board was very, very excited about the prospects for this, and very excited that the Chamber of Commerce is going to have a permanent home," said Chairman Bobby Jenkins. He added that the new space will give the Chamber "room to grow — and room to meet."

The Chamber reportedly holds hundreds of meetings a year and, due to their current lease only offering 12,000 square feet of space, have had to rent out rooms at local hotels and other venues to accommodate the attendees. Paul Bury, President of Bury + Partners (which was instrumental in the search for the property), said the Chamber will save "significant dollars" by not having to rent off-site meeting space. He explained that hosting the monthly Board meetings elsewhere cost the Chamber as much as $15,000 a year. "After we evaluated everything, the purchase of the space rose to the top," Bury said. "It's just a win, win, win. We haven't really found a negative yet. We're really excited about the opportunity."

For more news and information visit Blumberg Capital Partners.

NAR Says CRE Market Stabilizing, Vacancies Peaking

According to the National Association of Realtors® the commercial real estate markets are flattening out and appear to be stabilizing. The association expects modestly improving fundamentals in the coming year. "Property fundamentals are improving, investment capital is slowly flowing back into the sector, commercial mortgage originations are increasing, and demand for CMBS issuance is gaining traction," Standard & Poor's said in a Bloomberg report. An excerpt from NAR's office market findings:

Vacancy rates in the office sector, where a large volume of sublease space remains on the market, are forecast to decline from 16.7 percent in the current quarter to 16.4 percent in the fourth quarter of 2011, but with very little change during in the first half of the year.

The markets with the lowest office vacancy rates currently are New York City and Honolulu, with vacancies around 9 percent. All other monitored markets have double-digit vacancy rates.

Annual office rent is expected to decline 1.8 percent this year, and then slip another 1.6 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, should be a negative 3.7 million square feet this year and then a positive 16.4 million in 2011.

For more news and information visit Blumberg Capital Partners.