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​​​​​​​​​United States Office Outlook | Q2 2018

The U.S. office market maintained steady growth in Q2, with sustained occupancy and rent growth and a healthy supply pipeline that will provide further options for tenants. Although the pace of occupancy gains (12 million square feet year-to-date) slowed from peak levels and rising concession packages put pressure on net effective rents in select markets, solid macroeconomic and employment growth have bolstered both leasing demand and investment sales activity in the office sector.

Vacancy rose by 10bp to 14.9% in Q2 on the back of rising deliveries, with new space hitting the market roughly twice as fast as occupancy growth. Demand from cost-conscious tenants is keeping sublease vacancy – a leading indicator for changing market conditions – in check, and we expect supply-and-demand dynamics to shift gradually rather than abruptly in the coming quarters.

Economic growth, robust job creation and positive consumer, employee and business sentiment will ensure that demand for space healthy over the near term. Occupiers in particular will find themselves with improving leverage and a wider variety of space options at a more attractive range of price points.

Here are four 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 ($)

Rents rose by 0.1% during the first quarter as an increasing amount of commodity space in CBDs is being given back from relocating tenants.

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

Absorption continues to be positive, but the nearly 12 m.s.f. of growth seen so far this year is still below previous years.

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

Vacancy is rising steadily, up 10bp during Q1 to 14.9%. As new space hits the market, vacancy will continue to increase incrementally.

Market Total vacancy (%)
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Under construction (s.f.)

Construction volumes are stable on the back of a slew of starts, but are likely to decline as market conditions shift.

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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