Office vacancies in U.S. cities dropped to the lowest rate in more than three years in the second quarter, with San Francisco, Miami and Washington increasing occupancies amid an improving economy.
The vacancy rate for central business districts in U.S. cities fell to 13.7% from 14.2% in the previous three months and 15% a year earlier, according to data provided by New York-based real estate service provider Cushman & Wakefield. Last quarter's vacancy rate was the lowest since 2002's first quarter, when it was 13.2%.
Companies are leasing additional office space as they add jobs or prepare to hire workers, giving a boost to landlords. The jobless rate last month dropped to the lowest since September 2001, according to the Labor Department. The average office rent in the second quarter was $25.17 a square foot, up from $24.73 a year earlier and $25.04 in the previous three months.
"It has been the fact that we've been adding jobs, usually 200,000 a month," said Maria T. Sicola, senior managing director for research services at Cushman. As for available space, "it's been the classic supply-demand paradigm. We haven't seen as much construction lately."
Washington's central business district had the lowest office vacancy rate in the country, dropping to 7.6% from 8.1% a year earlier. The rate, however, was above the 7.5% rate in the first quarter -- an indication, along with a decline in leasing activity, that occupancies may not increase much further, Sicola said.
Vacancy rates dropped across Florida in the second quarter, declining 2.2 percentage points from a year earlier to 15.6% in Miami, and 2.1 percentage points to 11% in Palm Beach.
San Francisco and surrounding areas, which had been hurt by the decline in the technology industry, continued to recover in the second quarter. The vacancy rate in downtown San Francisco fell to 15.5% from 18.6% a year earlier, and rents in the city surged 7.8% to $29.76 a square foot, Cushman said.
Other cities where vacancies declined in the second quarter include Midtown Manhattan, which fell to 9.2% from 11.3% a year earlier; downtown Los Angeles, which declined to 15.9% from 17.7%; and Orange County, which dropped to 10.5% from 15.9%. Rents rose in each of the three areas in the quarter.