(Reuters) - U.S. office vacancy rate rose to 16.3 percent in the fourth quarter of 2017, from 16.1 percent a year earlier, rising for the first time in at least five years, according to real estate research firm Reis Inc (REIS.O).
Asking and effective rents increased 0.6 percent in the quarter, compared with the third quarter, registering the highest quarterly growth rate in six quarters. Rent growth was 1.8 percent for 2017.
“The year-end numbers showed a consistent deceleration in occupancy but somewhat higher rent and employment growth than in previous quarters. We expect this trend to continue at the start of 2018 as more office construction is expected to come on line,” Barbara Denham, senior economist at Reis, said in a statement.
Denham believes businesses may feel renewed confidence in 2018 as the recently passed tax bill should return more profits to their bottom lines.
“This could foster more robust leasing activity. Rent growth will likely increase as well, but we are not likely to see an impact until late 2018 or so,” Denham said.
Net absorption, which is measured in terms of available office space sold in the market during a certain time period, plummeted about 60 percent to 5.21 million square feet in the fourth quarter, compared with a year earlier.
Construction activity slowed, with about 7.00 million square feet of new office construction completed during the quarter, compared with 10.7 million square feet a year earlier.
Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel