Office sectors in smaller markets are showing greater resiliency, and companies are taking notice. The only increases in office occupancies in the first quarter were in secondary cities, and even those were modest. These secondary markets are known for having cheaper office rents compared to major markets, the National Association of REALTORS® reports on its Economists’ Outlook blog. The low rents in secondary cities may incentivize more companies to relocate.
Demand in secondary office markets is growing the most in the following sectors:
- Information technology
- Biosciences/medical/health care
Though overall office occupancy in the first quarter declined in 84% of the 89 metros that NAR tracks, there were signs of hope regionally.
- West: Office occupancy rose in San Mateo County, San Diego, and Sacramento in California as well as in Tucson, Ariz.
- South: Office occupancy increased in Tulsa, Okla.; suburban Maryland; Fredericksburg, Va.; and Fort Myers-Naples, Fla.
- Northeast: Office occupancy increased in Brooklyn, Buffalo, and Syracuse in New York.
Office rents varied significantly depending on the location. For example, asking rents in San Francisco were $74 per square foot, but in Los Angeles, they were $45 per square foot. In San Diego, office rents fell to $41 per square foot, and in Sacramento, they declined to $25 per square foot, Gay Cororaton, a research economist for NAR, notes on the association’s Economists’ Outlook blog.