Dive Brief:
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Amid flat U.S. office vacancy rates — 16% from the second to third quarter of 2016 — New York City has emerged as the U.S. metro with the lowest level of empty office space at 9.2%, according to the New York Business Journal.
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After New York City, Washington, DC (9.3%), San Francisco (10%), Seattle (10.8%), Boston (11.9%) and Portland, OR (11.9%) had the lowest vacancy rates.
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The third quarter represents the first stall in vacancy rates in about two years, but Reis economist Barbara Denham told the Business Journal that she expects higher occupancy rates in the fourth quarter to reflect the employment growth that took place over the summer.
Dive Insight:
The New York Building Congress reported last month that demand for office space in New York City is so high that it expects developers to add 23 office buildings, totaling more than 20 million square feet, in Manhattan by 2021. Another 13 million square feet of office space is in store for Brooklyn and Queens, according to the NYBC. Most of the city's new office space will come from the Hudson Yards development in Manhattan.
Nationwide, the National Association of Realtors reported in August that the U.S. commercial real estate market should continue to perform well, particularly in smaller markets where there is still enough inventory to keep prices from skyrocketing. The association expects national vacancy rates to dip 1.5% in the next year to 10.4% in response to robust employment growth and the subsequent need for more office space. However, NAR Chief Economist Lawrence Yun said last month that a "tightening in credit standards" could lead to a reduction in future building and leasing.