San Jose and Seattle-Tacoma took the top two spots in brokerage firm’s Marcus & Millichap’s 2017 National Office Property Index (NOPI), a U.S. office market forecast based on indicators of a market’s potential and overall strength. Meanwhile, San Francisco slipped from first to third place and New York from third to sixth position. Increased demand by office tenants in the top two markets accounted for their rise in rank, while San Francisco’s slide is resulted from slowing job growth and increasing vacancy.
New York’s office market, according to John Chang, Marcus & Millichap’s first vice president of research services, is losing momentum because businesses, such as law firms, are downsizing their space at the same time as 2.5 million sf of new construction is coming on-line.
A big surprise this year was the introduction of Raleigh, N.C., a market that had not been included previously, into a top 10 position on the list, Chang notes. There were also the more predictable movements of Portland, Ore. from 10th to fourth place, Boston from 12th to fifth place and Oakland, Calif. moving up four notches to ninth place. Austin slipped from the sixth to seventh position—mainly due to the amount of office construction in the pipeline—and Orange County, Calif. dropped from seventh to 10th place as new product came on-line.
NOPI provides a one-year snapshot of 46 major office markets based on a series of 12-month, forward-looking economic and supply/demand variables. Rankings are based on weighted average scores for market indicators, including projected employment growth, vacancy rate movements, the amount of planned construction and average rents.