The top 10 office markets will continue to slow through 2003, according to a recent report by New York-based Cushman & Wakefield. The report assessed the outlook for the 10 largest office markets in the U.S. from fourth-quarter 2001 through the end of 2003.
"With the nation in the midst of an economic recession, the economies among the nation’s Top 10 office markets are expected to slow through 2003 and will not match their robust growth of the past several years," the report states.
Total Central Business District (CBD) and non-CBD inventory for the top 10 markets ranged from 100 million sq. ft. in the smallest (Philadelphia) to 600 million sq. ft. in the largest (the New York region) during third-quarter 2001. Washington, D.C., is the second largest market, followed by Chicago, the San Francisco region, Los Angeles, Dallas, Houston, Boston and Atlanta.
Of these top markets, the Sunbelt economies of Atlanta, Houston and Dallas will continue to outperform the older economies of the Northeast and the Midwest, according to Cushman & Wakefield. In terms of rental growth, Atlanta will eclipse other metro areas, rising from an annual average increase of 2.7% over the last three years to a forecasted 3.7% rise from fourth-quarter 2001 through the end of 2003. On the other hand, Dallas’ growth will decline from 4.9% to 3%, and San Francisco’s growth from 3.9% to 1.2% over the same time periods.
In general, the report says CBDs will outperform suburban markets through 2003, posting smaller increases in overall vacancy rates and stronger growth in overall asking rents. Through 2003, Washington, D.C. — driven by a diverse and growing private and public sector tenant base — is projected to be the strongest CBD office market among the top 10 markets.
The past year did not repeat the extraordinary year of 2000, the report notes. By the third quarter, many top CBDs slid closer to equilibrium or below.
