Across the nation, Leasing activity was solid across all property types in the second quarter, which is surprising because the economy lost momentum during this period. Perhaps the biggest surprise was the office market, where demand is relatively more dependent than other property sectors on job creation. Office vacancy fell by 40 basis points in the second quarter even though the labor market added just 43,000 net new payroll jobs in May and June combined. Industrial vacancy fell 30 basis points thanks to surging global trade, business capital spending and supply chain reconfiguration.
Apartment vacancy declined 20 basis points as the homeownership rate continued to slip, and retail vacancy fell by 10 basis points as stronger retailers expanded to gain market share, particularly retailers targeting upscale consumers. It remains to be seen whether the strong performance of the leasing markets in the second quarter was a delayed reaction to growth earlier in the year or whether it means that tenants' desire to expand might be more sustainable than the economic data would suggest. Look for continued moderate improvement in the leasing markets over the next few quarters as the economy moves forward in fits and starts.
Source: CoStar, Reis, Grubb & Ellis