Natural Gas Boom Fuels US Office Market
From The Morning Call
Leasing demand from natural gas and other energy companies is helping to bolster the U.S. office market and drive growth in cities such as Pittsburgh, where rents are at their highest in more than a decade.
Greater Pittsburgh, along with Houston and other cities with concentrations of energy-related workers, is outpacing national growth in rents and occupancy, according to a report today from Reis Inc., which showed U.S. office landlords had net gains in leased space for a second year in 2012, following three years of declines. Tenants in energy, along with technology, helped push the national vacancy rate to a three-year low.
In the fourth quarter, greater Pittsburgh office rents after landlord concessions climbed 1 percent from the previous three months, compared with 0.8 percent for the U.S., while the area’s vacancy rate held at 15.5 percent, below the national average of 17.1 percent, New York-based Reis said. Pittsburgh tenants paid an average of $17.68 a square foot in the fourth quarter, the highest since 2000, ranking it 12th out of 79 markets for growth. In Houston, effective rents rose 1.7 percent, the fifth-most nationwide.
“In a market that’s been very choppy, the energy sector has been one of the bright spots,” said Dennis Friedrich, chief executive officer of Brookfield Office Properties Inc., the New York-based owner of Houston’s Allen Center and properties in other energy-dominated markets, including Denver and Calgary.
The fourth-quarter U.S. office vacancy rate, down from 17.2 percent in the previous three months and 17.4 percent a year earlier, was the lowest since the end of 2009, Reis said.
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