Colliers latest report takes a comprehensive look at the 3Q market in multiple North American cities throughout America and Canada.
• Job growth drove office demand in both the U.S. and Canada through the first three quarters of 2014. Employment grew year-over-year in both countries, with the U.S. on pace to create the most jobs in 2014 since 1999.
• U.S. office-using employment growth was even stronger than overall job growth, at 2.8% year-over-year in September compared with 1.9% growth in total payrolls. About 1.3 office-using jobs have been added during the recovery for every 1 office-using job lost in the recession.
• Indicative of the broadening economic and office market recoveries, just 15 of the 84 U.S. metro areas tracked by Colliers lost office-using jobs year-over-year in August 2014. Previous laggards such as Las Vegas, Los Angeles, Sacramento, Phoenix and Jacksonville were among the strongest markets for office-using job growth.
• The North American vacancy rate in Q3 2014 decreased by 21 basis points to 13.1%, with improvements in both the U.S. and Canada. The U.S. vacancy rate of 13.5% was the lowest since Q2 2008.
• North American absorption of 17.8 million square feet (MSF) in Q3 2014 was the highest quarterly total this year, with both the U.S. and Canada posting positive absorption both in Q3 2014 and year-to-date.
• In a notable shift from recent quarters, absorption in the primary finance, insurance and real estate (FIRE) markets at 6.9 MSF nearly equaled the 7.9 MSF of absorption in the primary intellectual capital, energy and education (ICEE) markets. With the ICEE markets having led the current recovery, strong absorption in the FIRE markets indicates how much the recovery has broadened to include markets driven by more traditional office-using industries.
• Construction activity continued to tick up in Q3 2014 but remains highly concentrated in a small number of markets. More than 60% of the 110 MSF underway in North America is located in the top 10 metro areas.
• According to Real Capital Analytics, North American office transaction volume reached $32.0 billion in Q3 2014, the highest total this year. Demand from both domestic and cross-border investors remains voracious, particularly given softening economic conditions elsewhere around the globe. We expect stronger office market fundamentals in secondary and tertiary markets to attract greater investor interest into 2015, further boosting aggregate transaction volume.