The record high vacancy rate established during the Global Financial Crisis is “being comfortably put in the rearview mirror,” according to Colliers’ Steig Seaward in his firm’s Q3 US Office report.
The vacancy rate increased by 30 basis points for the second consecutive quarter and sits at 16.7%, putting it 40 bps higher than the previous mark.
The national vacancy rate rose 140 basis points year-over-year and Q3 also marked the fourth consecutive quarter of negative absorption totaling over 70 million square feet.
South Florida has the lowest metro vacancy rate outside of the tertiary markets at 10.1%, followed by Jacksonville (10.4%) and Las Vegas (11.3%).
Austin has the highest metro vacancy rate at 23%. Houston (22.3%) and St. Louis (21.8%) follow closely behind.
The Central Business District (CBD) and suburban vacancy rates rose by 30 basis points in Q3 2023 to 17.6% and 16.3%, respectively.
Dallas (just under 500,000 square feet) and Detroit (389,000 square feet) were tops in absorption. Raleigh-Durham (379,000 square feet) and South Florida (347,000 square feet) ranked just after them.
Atlanta, Greater Los Angeles, Greater New York City, Phoenix, and Minneapolis-St. Paul were the greatest absorption laggards.
Despite the raging vacancy rate, there’s been minimal impact on asking rents, Seaward said.
“Most landlords have held firm, and more expensive new construction is delivered,” he said. “Effective rents, which consider landlord concessions, have behaved more in line with softening market fundamentals.”
The abundance of sublease space will add to this pressure, posing significant challenges for landlords when leases expire, he added.