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​​​​​United States Office Outlook | Q1 2017

Optimistic economic forecasts look promising for the U.S. office market, which saw higher rents and continued growth in Q1 2017. However, as we slowly enter a new phase of the economic cycle, we're seeing a shift in supply and demand.

Expansion continues for companies that need small blocks, while large deals are closing without much footprint growth. And, as the labor market tightens, many companies are struggling to find the skilled talent they need. As a result, occupancy gains have slowed to 3.6 million square feet even with rising rents and strong demand.

At the same time, we’re in a development boom. Nearly 16 million square feet delivered during the first three months of the year, and more new, quality supply will hit the market throughout 2018. More companies will relocate and give back their existing space, which, in turn, could inch vacancies higher as occupancy growth plateaus.

Here are three things to keep an eye on in the coming months:

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Click through the tabs below to compare market performance across key categories.

Rental rates ($)

Class A rents climbed 3.5% year-over-year, while Class B recorded gains of 2.6%.

Market Rental rates ($)
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YTD net absorption (s.f.)

Quarterly net absorption came in at 3.6 m.s.f., led by Seattle-Bellevue, Dallas, Phoenix, San Antonio and Austin.

Market YTD net absorption (s.f.)
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Vacancy (%)

Vacancy broke its downward trend and jumped to 14.7% in Q1. Nashville remains the tightest market in the country at 8.1%, followed by San Francisco (8.3%) and Seattle-Bellevue (8.5%).

Market Vacancy (%)
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Under construction (s.f.)

106.4 m.s.f. is currently under construction—down from Q4’s 111 m.s.f. due to concerns about oversupply and shifting tenant demand.

Market Under construction (s.f.)
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United States office property clock

JLL Office Outlook clock (image)

Source: JLL

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