February 11, 2019
New research by Marcus & Millichap’s Institutional Property Advisors (IPA) division shows the U.S. economy remains structurally positioned for growth in 2019. The firm’s First Quarter 2019 Office Investment Forecast Report indicates steady employment gains, wage growth and increased consumption will align to deliver GDP growth in the low- to mid-2% range, but several hurdles could weigh on the momentum.
The report points out steady job creation will sustain economic growth in the coming year, but the tight labor market will create a highly-competitive recruiting climate that restrains total job additions. To attract and retain top candidates, companies will continue to raise wages, but benefits, the work environment and job location will become increasingly important.
According to the report, the heightened small-business optimism will reinforce hiring trends and office space demand in 2018. Historically, small-business confidence and net absorption have moved hand in hand as firms expand to larger office footprints in anticipation of new hires.
The key findings of the National Office Index (NMI) include:
– Seattle-Tacoma leads the 2019 Index, maintaining the position it captured last year. Other strong tech hubs follow, with San Francisco (No. 2) rising one place and San Jose (No. 3) moving up two spaces. The only newcomer to the Index’s top five is Raleigh (No. 5), propelled by robust leasing that has produced single-digit vacancy.
– Sunbelt metros made the most significant changes in the 2019 NOI. Charlotte (No. 8) and Phoenix (No. 17) each vaulted eight places, while Orlando (No. 20) jumped seven slots. The largest declines in this year’s Index were registered by Miami-Dade (No. 22) and San Antonio (No. 32), moving down eight places, followed closely behind by Tampa-St. Petersburg (No. 16) and Portland (No. 11), which each slipped seven spots.
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