Demand for office space is highest in U.S. since 2006
U.S. businesses expanded into more office space in 2014 than in the eight years prior, according to a new report by DTZ, a global property services provider.
Many analysts saw the office sector as one of the slowest real estate sectors to recover. Job growth is now fueling stronger occupancy gains, said Kevin Thorpe, DTZ's chief economist for the Americas.
The report also found that rent rates increased in 70 percent of U.S. cities. In 2014, U.S. markets absorbed a total of 70.2 million square feet of office space, marking the highest demand since 2006.
The national vacancy rates dropped as well. About 61 percent of the 80 metro areas tracked by DTZ reported fourth-quarter gains in filling office space.
"If one annualizes the second half of 2014, the office sector has been absorbing space at nearly twice its historical average," Thorpe said in a statement. "For most of this recovery, shifts toward space efficiency — lower square feet per worker — dampened aggregate demand, but robust job creation has taken over as the dominant force. Fundamentals still vary greatly by location, but the latest demand metrics can no longer be characterized as subpar. This is robust."
The West saw the highest increase in net absorption, up 89 percent from 2013. The Midwest — composed of Nebraska, Kansas, Missouri, Iowa, Illinois, Indiana, Michigan, Ohio, Minnesota, North Dakota and South Dakota — only saw an average net absorption gain of 1.2 percent in 2014.