U.S.

Research Report
TOP OFFICE METROS SNAPSHOT
Q1 2018

Most Major Office Markets Hold Steady in

First Quarter 2018
Coworking Firms Continue to Expand Their Presence

Featured Highlights
MARKET METRO CORE
ABSORPTION AVG RENT VACANCY
1-YR CBD CORE SUBMARKETS
>> Most major office markets in the U.S. held firm in Q1 2018. (SF) ($)* RATE
OUTLOOK INVENTORY (SF)
Changes in vacancy and rental levels were mostly marginal. Manhattan: Midtown,
Manhattan, NY
Midtown South, -2,423,810 $76.03 6.2%
503,295,206
>> Strong tenant preference for new construction continues Downtown

unabated as companies seek to retain and attract the best CBD (DC), East End
(DC), Capitol Hill (DC),
talent. Pre-leasing of new construction is necessary to meet NoMa (DC), Capitol
most major tenant requirements. Washington, D.C. Riverfront (DC), Carlyle
653,933 $48.42 14.3%
  185,661,009 (DC), R-B Corridor
(NOVA), Tysons Corner
>> Coworking operators continue their aggressive expansions. (NOVA), Bethesda
WeWork signed leases for 200,000 square feet or more in (SubMD

Boston, Manhattan and San Francisco and took down space West Loop
Chicago, IL Central Loop
in several other markets. 131,314,796 River North
-77,102 $39.98 12.6%
East Loop
>> The San Francisco Bay Area continues to lead the pack with CBD, Katy Freeway,
Houston, TX   
the lowest vacancy rate and highest asking rents of our top 118,059,891
West Loop (Galleria), -975,883 $35.05 21.9%
Westchase
10 office metros. Silicon Valley continues to attract the tech
Dowtown Los Angeles,
giants. Facebook and Amazon leased a combined 1.8 million Los Angeles, CA
West Los Angeles, 202,000 $46.06 15.6%
114,247,500
square feet in one project alone. Tri-Cities
Midtown
>> Manhattan has the second-highest asking rates and second- Atlanta, GA Buckhead
730,115 $28.57 13.6%
101,890,026 Central Perimeter
lowest vacancy rate among the top 10 markets. New Cumberland/Galleria
construction scheduled for completion in 2018 is on track to Financial District (North
be the highest since the 1980s. The shortage of large blocks San Francisco
Financial District
& South Financial
is easing. Bay Area, CA District), SOMA (West 1,752,462 $78.82 5.8%
95,753,726 SOMA & East SOMA),
Palo Alto, Mountain
>> Boston has become the most dynamic market in the top 10 View, Sunnyvale
and landlords hold the stronger hand. Three major pre-leases Uptown, Preston
Dallas, TX
were signed in Q1 2018 with more set to follow. 76,065,228
Center & 982,123 $31.15 14.8%
Far North Dallas

>> Far North Dallas’ heady construction cycle is ending after a Back Bay, Financial
District, Charlestown,
series of major corporate campus developments with the last Boston, MA
Crosstown, Fenway/ 619,637 $56.07 9.6%
69,156,442
(for now) being delivered in the first quarter. Kenmore, South Station,
North Station, Seaport

>> Supply-side concerns in Los Angeles have not abated. Seattle CBD, Lake
Seattle, WA Union, Pioneer Square,
Several large projects are still available in both Downtown 69,156,442 Belltown, Queen Anne,
932,004 $40.32 8.7%
and West LA as the anticipated leasing traction has yet to Ballard

emerge. * A quarterly rent change of +/-1% or less, is judged to be flat.

 >> Chicago also has several major projects underway, only one of which
is fully committed. Fulton Market, once considered a fringe location,
continues to garner interest.
>> Houston is still the most challenged market in the top 10 and had
the largest increase in vacancy in the first quarter. Leases are set
to start expiring on the surfeit of large sublease blocks formerly
occupied by the energy sector and it will be interesting to see how
landlords respond.
>> Seattle saw its vacancy rate jump in Q1 2018 but is still one of
the strongest markets in the top 10. Although there is significant
construction activity underway, most projects are pre-committed.
>> New supply continues to enter the Washington, D.C. market with 6.5
million square feet underway in The District alone. The majority of
this space is set to deliver this year.
Washington, D.C.
LOCAL INSIGHTS
>> Rents and vacancy held firm in the Manhattan office market in
Q1 2018 but there was a slowdown in leasing activity. Average
Manhattan
asking rates of $76.00 per square foot and a vacancy rate of
6.2% in Manhattan are bettered by only the San Francisco Bay
Area.
>> First quarter leasing activity in Manhattan totaled 7.6 million
square feet, down by 23% from Q4 2017 and 18% year over
year, but slightly above the 10-year average. First quarter
net absorption was negative 2.4 million square feet, making
it Manhattan’s highest quarterly negative absorption level in
nine years. This was due to the addition of 19 large blocks of
available space of 100,000 square feet or more, comprised of
both new construction and existing buildings.
>> There are now 76 large blocks available across Manhattan
totaling 14.7 million square feet, including 11 blocks of more
than 250,000 square feet accounting for 5.3 million square
feet. Average asking rents across the 11 spaces stand at
$84.60 per square foot, reflecting a 16% premium to the
market average.
>> Average asking rates stand at $79.20 per square foot in
Midtown, $71.55 per square foot in Midtown South and $63.40
per square foot Downtown. Reflecting its relative lack of large
blocks, the addition of new or renovated Class A space and
the type of inventory that is in demand from firms seeking
creative space, Class A asking rents in Midtown South, at
$86.15 per square foot, are higher than those in Midtown at
$81.90 per square feet. Hudson Yards/Manhattan West has the
highest asking rates of any submarket at $92.20 per square
foot, followed by $90.50 per square foot in Midtown’s Plaza
District.
Chicago
>> Leasing activity in Q1 2018 was led by the FIRE (Financial,
Insurance and Real Estate) sector which accounted for 45%
of the quarterly total. JP Morgan Chase & Co. signed the first
quarter’s largest new lease, taking 418,240 square feet at 390
Madison Avenue in Midtown. WeWork continued to expand its
Manhattan presence in Q1 2018, taking 167,000 square feet at
18 West 18th Street and 122,190 square feet at 154 West 14th
Street, both of which are in Midtown South’s Chelsea District.
>> Construction deliveries in 2018 are set to be the highest
level in Manhattan in almost 30 years. A further 6.9 million
square feet is set to arrive in the remainder of 2018, of which
2.9 million square feet has yet to be leased. The bulk of the
available space is in 3 World Trade Center. With a clear tenant
preference for new construction, this space is not expected
to linger on the market. The larger question is what will be
required to fuel an uptick in leasing activity to fill the space left
behind?
>> Although vacancy remains elevated, the Washington, D.C.
office market looks to be stabilizing. In line with the prior
quarter, both rents and vacancy exhibited minimal change
in Q1 2018. Encouragingly, net absorption remained positive
and the quarterly total of 653,930 square feet was more than
half-a-million square feet higher than the modest level seen in
Q4 2017.
>> Average asking rents stand at $48.40 per square foot, slightly
higher than in Q4 2017. The delta between Class A asking
rents in the District and Northern Virginia continues to widen.
New construction is fueling rental growth in the District,
where rates now stand at $60.30 per square foot. Comparable
rents in the principal suburban markets of the Rosslyn-
Ballston (R-B) Corridor and Tysons Corner range from $40
to $45 per square foot. While vacancy in Tysons Corner, at
13.9%, is on par with the District, it remains stubbornly high at
25.5% in the R-B Corridor.
>> There is 6.5 million square feet of new construction underway
in the District, over half of which (3.5 million square feet)
is in the core submarkets of the Central Business District
(CBD) and the East End. NoMA is expanding at a fast clip
with 1.1 million square feet underway, equivalent to 10% of
current inventory. Construction activity in Northern Virginia is
centered on Tysons Corner, where there is 1.6 million square
feet underway.
>> Tenants continue to exhibit a strong preference for Class
A space. In our Q4 2017 report, we noted a concern about
the volume of older inventory that was being left behind as
firms relocate to new construction and landlords’ abilities to
repurpose this space. One of the largest blocks of such space
came off the market in Q1 2018, with the lease and planned
conversion of 4000 Connecticut Avenue NW into a private
school.
>> The Chicago office market took a step backward in Q1 2018.
Although rents held firm, absorption turned slightly negative
and vacancy rates increased. Net absorption was negative
77,100 square feet and there were only modest variations
across the four core submarkets, with absorption ranging from
negative 133,100 square feet in the Central Loop to 141,540
square feet in River North.
Top Office Metros Snapshot | Colliers International 2
 >> Chicago’s office vacancy rate increased by 100 basis points
(BPS) in Q1 2018 to 12.6%, the third-highest increase in
vacancy among the 10 markets featured in this report. River
North has the lowest vacancy rate at 8.9% and the West Loop,
at 13.7%, is the highest closely followed by the Central Loop
at 13.5%. Average asking rates are $40 per square foot with a
$7.00 delta across the submarkets. The West Loop and River
North lead the pack with average rental rates of $43.25 and
$42.30 per square foot, respectively. The lowest rates were in
the East Loop at $35.10 per square foot.
>> The West Loop and River North captured the five-largest
leases signed in Q1 2018. In the West Loop, BP renewed its
240,000-square-foot lease at 10-30 S. Wacker Drive, while
Morgan Stanley leased four floors totaling 125,000 square
feet in the Willis Tower at 233 S. Wacker Drive. The bank
is also evaluating an option to terminate its lease at 440 S.
LaSalle Street and take more space in the Willis Tower, which
continues to garner interest as it undergoes a major upgrade.
There were three leases of approximately 80,000 square feet
signed in River North, including co-working provider Spaces
taking the entirety of the 80,000 square feet at 620 N. LaSalle
Street.
>> Five major office projects totaling 2.4 million square feet are
Los Angeles
scheduled to deliver in the remainder of 2018, three of which
are in the Fulton Market submarket. Once considered a fringe
location, Fulton Market has emerged as a viable alternative
to the Loop, with local developer Sterling Bay having two
projects underway, including the 486,000-square-foot new
headquarters for McDonald’s Corporation at 110 N. Carpenter
Street. The company is also building the 203,000-square-foot
210 N. Carpenter Street, where three tenants have pre-leased
space, including WeWork, who will be taking 40,000 square
feet.
>> Large block availability is on the rise, with 23 blocks of more
than 100,000 square feet available in the Chicago office
market. Most of these spaces (15 in total) are immediately
available, with the rest to follow by year-end. While tenant
relocations to new construction are contributing to this
supply, the largest space available is a new development at
625 W. Adams Street, which is scheduled to complete in Q2
2018. The 443,645-square-foot project has yet to secure any
tenants.
>> Following a positive finish to 2017, the Houston office market
saw a sharp about-turn in Q1 2018, with almost one million
square feet of negative absorption and a 160 BPS rise in the
Houston
vacancy rate to 21.9%. This is the highest vacancy rate across
the top 10 metros by a margin of over 6%.
>> The negative absorption was driven by a series of layoffs and
mergers, most notably by Technip who vacated over 375,000
square feet of space in the Katy Freeway submarket where
vacancy has reached 23.4%. Vacancy in the CBD moved up
by 120 BPS to 22%. The two largest lease transactions in
Q1 2018 occurred in the West Loop/Galleria where vacancy
is back below 20%. Apache Corp. renewed their lease for
524,300 square feet at Post Oak Central and The Williams
Companies recommitted to 324,300 square feet at Williams
Tower.
>> The high level of large-block availability hangs over the
Houston market and is not going away any time soon. There
are over 80 contiguous spaces of 100,000 square feet or
more available across the region, including 13 sublease blocks
of 150,000 square feet or more. The majority of these (10 in
total) are in the core submarkets highlighted by this report
and are almost exclusively in space formerly occupied by the
energy sector. As these leases begin to expire over the next
two to three years, owners will have to decide whether to
inject capital to reposition this space. Disposition could prove
challenging in a distressed market.
>> Fortunately, development activity remains in check with
construction starts predicated by having a lead tenant in place.
The principal exception is SCD Acquisitions’ counter-cyclical
play in the CBD, where the 778,340 square feet Capitol Tower
is underway and scheduled for delivery in mid-2019. The
project is 36% pre-leased.
>> The Los Angeles office market was static in Q1 2018. Vacancy
and rents held firm and net absorption, while positive, was a
muted 202,000 square feet. However, several new projects
are due to complete this year and have the potential to cause
vacancy to edge upwards absent of an uptick in demand.
>> Average asking rates remain at $46 per square foot. West LA
has the highest rates by a fair margin at $55.50 per square
foot compared with $40.20 per square foot Downtown and
$36.60 in Tri-Cities. Within West LA, Beverly Hills and Santa
Monica have the most cachet with rents in the mid-$60s per
square foot.
>> Downtown vacancy, at 20%, is considerably above the market
average of 15.6%. Vacancy rates in Tri-Cities and West LA
stand at 13.2% and 13.6% respectively. Although vacancy
moved up in Q1 2018, Burbank remains the tightest submarket
in Tri-Cities at 12.4%. Vacancy rates in West LA range from
5.5% in Olympic Corridor to 22.8% in Culver City. Century
City, at 9%, is the only high-end location in West LA with a
sub-10% vacancy rate.
>> Supply-side concerns have yet to ease. There is 4.1 million
square feet of office space under construction across
LA County of which 3.4 million square feet is located in
Downtown and West LA. Three-quarters of space underway
in West LA remains vacant. Developers were confident to build
on a speculative basis in West LA’s most prestigious locations,
but there has been little leasing traction. Two projects are set
to deliver in Q2 2018 led by the 200,000 square feet 2834
Colorado Avenue in Santa Monica, which is 70% vacant.
Downtown is facing a similar challenge. Although not due
to deliver until early 2019, there are two major projects
underway at 801 S. Broadway (500,000 square feet) and 757
S. Alameda Street (425,100 square feet) where no space has
been pre-leased.
Top Office Metros Snapshot | Colliers International 3
 >> Demand picked up in the Atlanta office market in Q1 2018
with 730,000 square feet of net absorption, up by more than
half-a-million square feet from the prior quarter. Vacancy held
Atlanta
firm and there was a slight uptick in rents. While first quarter
absorption was positive in all three of the core submarkets,
one major move-in alone accounted for over half of the net
gain, as NCR took occupancy of 485,000 square feet in Phase
I of its new headquarters in Midtown.
>> Average asking rates increased by 2% in the first quarter to
$28.60 per square foot. Midtown has the highest asking rates
at $34.65 per square foot, followed by Buckhead at $33.40
per square foot. Central Perimeter asking rates are slightly
below the market average at $27.65 per square foot, but the
submarket posted the greatest rental gains in Q1 2018. Central
Perimeter rents rose by 6% in the quarter, largely driven by
the addition of high-end, new product to the market, led by
the completion of the 355,250 square feet 4004 Perimeter
Summit.
>> The three largest leases transactions in Q1 2018 all took
place in Central Perimeter. Insight Global pre-leased 205,800
square feet in Trammell Crow Company’s Twelve 24 project,
while Northside Hospital and Arby’s leased 178,000 and
160,830 square feet respectively of Class A space. The
submarket is gaining in popularity as Class A availability
tightens in Midtown and high-profile moves bring an increased
Dallas
focus on Central Perimeter as an attractive alternative to more
expensive locations.
>> There are 10 projects of 100,000 square feet of more under
construction across the Atlanta metro, half of which are in
Midtown. The largest of these is the 760,000 square feet
Coda at 771 Spring Street, which is scheduled to deliver in
early 2019. WeWork pre-leased 50,000 square feet of space
in this project in Q1 2018. Other major Midtown developments
underway include Phase II of NCR’s new headquarters
and the 343,270 square feet 725 Ponce, which is fully
available. Developers are showing confidence that Midtown’s
combination of an attractive location, high-end space and
proximity to Georgia Tech will attract tenants seeking to hire
and retain the best talent.
>> The San Francisco Bay Area (the Bay Area) office market is
the strongest of the 10 markets highlighted in this report with
San Francisco
the highest average asking rates (at $78.70 per square foot)
and the lowest vacancy rate (at 5.4%.) The Bay Area also
posted the largest amount of net absorption of the major office
markets in Q1 2018, with a quarterly total of 1.7 million square
feet.
>> Reflecting the tight vacancy rate and strong demand, the gap
between Class A and Class B rents is slim. Average Class B
asking rates in San Francisco stand at $75.40 per square foot,
reflecting a discount of less than $7 per square foot from their
Class A counterparts. In San Francisco’s Financial District,
both Class A and B properties are attracting average rents in
the low to mid $80’s per square foot. Average asking rates in
Silicon Valley are $81.85 per square foot rising to over $90 per
square foot in Palo Alto Central, where the vacancy rate is a
mere 1.9%.
>> San Francisco’s largest lease transaction in Q1 2018 occurred
at 400-430 California Street, where WeWork leased the entire
251,000 square feet, making the coworking provider the 10th
largest occupier in the market across 13 locations. While there
were no blockbuster deals in San Francisco this quarter, tech
leasing continued apace with Stitch Fix, New Relic, Samsara
and Google signing leases that range from 57,000 to 134,000
square feet.
>> San Francisco’s tallest office building, the 1.4 million square
feet Salesforce Tower, completed in Q1 2018, leaving 5.1
million square feet still underway. Over 4.3 million square feet
of this space is scheduled to deliver by year-end 2018 and all
but one of the new projects are pre-leased. The outlier is the
751,000-square-foot Park Tower on Howard Street, which is
fully available, but is now the only major new space option in
the market. Facebook is understood to be in discussions to
lease the entire development.
>> Office construction volume in Silicon Valley has risen to 6.1
million square feet with three projects breaking ground in Q1
2018, all of which are fully pre-leased. These include the 1.8
million square Moffett Towers II in Sunnyvale where Facebook
took 1.1 million square feet and Amazon leased the balance.
>> The Dallas office market showed stability in Q1 2018, with
rents holding firm and vacancy declining slightly by 30 BPS.
Although absorption fell in the quarter, it remained firmly
positive at almost one million square feet. However, with large
corporate move-ins to new headquarters in Far North Dallas
ending, it is unclear what will drive demand going forward.
>> Once again, Far North Dallas accounted for the lion’s share
of absorption with Liberty Mutual taking occupancy of its 1.1
million-square-foot build-to-suit new campus representing
73% of first quarter absorption across Dallas-Fort Worth.
Construction activity has slowed down markedly in Far North
Dallas. Uptown/Turtle Creek, at 1.2 million square feet, now
has the greatest amount of space underway in the core Dallas
submarkets.
>> Average asking rates in the Dallas office market stand at
$31.15 per square foot. Average asking rates in Preston Center
and Uptown/Turtle Creek remain around $40 per square foot
but new space in prestigious locations can achieve upward of
$50 per square foot. Despite the elevated level of construction
activity in Uptown/Turtle Creek, downward pressure on rents
is unlikely. The submarket will be virtually built-out once
the current round of projects completes and 55% of space
underway is pre-leased.
>> Leasing activity was muted in Q1 2018 across the submarkets
tracked in this report, with no new leases signed of 50,000
square feet or higher. The largest lease signed in the Dallas-
Fort Worth market in the first quarter took place in the Dallas
CBD, where Thompson & Knight LLP signed a renewal for
154,000 square feet at 1722 Routh Street. However, despite
higher availability and significantly lower rents, the CBD has
yet to become a competitive alternative to the more expensive
close-in submarkets of Preston Center and Uptown/Turtle
Creek.
Top Office Metros Snapshot | Colliers International 4
 >> The Boston office market has become the most dynamic
of the 10 markets covered by our report. In Q1 2018,
the vacancy rate fell more than any other market in this
Boston
Seattle
report, while absorption was firmly in the black. Rents
are the third-highest in our survey and the high volume of
tenant requirements in the market looks set to push them
up higher.
>> Boston’s office vacancy rate fell by 100 BPS in the
quarter to 9.6%. Seaport remains the tightest of the core
submarkets with vacancy at 6.9%, compared with 9.6%
in Back Bay and 11.9% in the Financial District. Available
Class A space in Seaport is virtually non-existent with
a sub 1% vacancy rate. Back Bay was the principal
beneficiary of this shortage in Q1 2018, with over
350,000 square feet of positive absorption.
>> Tight Class A supply and a shortage of available large
blocks are driving two key trends in the Boston office
market. Tenants with large space requirements are
turning to new construction and the gap between Class
A and Class B rents is narrowing. Five leases of more
than 100,000 square feet were signed in Q1 2018 and the
two largest were pre-leases. Amazon signed a 460,000
square feet lease for the first phase of a potential two-
step one million square feet expansion in Seaport Square,
and Mass Mutual leased 300,000 square feet of new
construction at 10 Fan Pier Boulevard.
>> As noted in prior reports, WeWork continues to expand
at a fast clip in Boston and took a further 200,000
square feet in Q1 2018 across two properties, 33 Arch
Street in the Financial District and 501 Boylston Street
in Back Bay. With almost 5.5 million square feet of active
tenant requirements in the Boston office market, look for
more large leases to be announced. When measured by
the volume of requirements in the market, prospective
demand is double the level seen five years ago.
OFFICE SERVICES | contact RESEARCH | contacts
Cynthia Foster Pete Culliney
President, Director of Research | USA
National Office Services +1 212 716 3698
+1 212 716 3515 pete.culliney@colliers.com
cynthia.foster@colliers.com
Copyright © 2018 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its
accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors
prior to acting on any of the material contained in this report.
>> Trends in the Seattle office market were mixed in Q1 2018.
Absorption more than doubled and rents held firm, but
vacancy increased. Vacancy rose by 160 BPS to 8.7%, which
ties with Houston as the largest increase among the markets
surveyed in this report. Despite this uptick, the Seattle office
market remains relatively tight with the third-lowest vacancy
rate of the 10 markets.
>> Net absorption totaled 932,000 square feet in Q1 2018, up
from 401,280 square feet in Q4 2017. The Seattle CBD and
Lake Union remain the principal beneficiaries, with first
quarter absorption of 530,560 square feet and 335,860
square feet respectively. Absorption in Lake Union was driven
by Facebook and Amazon, who both moved in to 150,000
square feet of space at 1101 Westlake and the Westlake Terry
building, respectively. Vacancy in Lake Union is only 4.9%.
>> As in most of the other major office markets, WeWork
continues to increase its presence, leasing 100,145 square feet
at 1600 7th Avenue in the CBD, which was the largest lease
signed in Q1 2018. Outside of this transaction, leasing activity
was somewhat muted in the first quarter. Average asking
rates held steady at $40.25 per square foot led by the CBD
at $44.50 per square foot and Lake Union at $41 per square
foot. View space in downtown’s trophy towers commands a
significant premium with average asking rates at close to $60
per square foot.
>> Construction activity remains elevated with 5.4 million square
feet underway in 11 projects of more than 100,000 square feet
in size. Three-quarters of this space is pre-committed, which
should limit near-term increases in the vacancy rate, led by
Phases III and IV of Amazon’s towers in Belltown/Denny
Regrade, totaling a combined 1.8 million square feet. There
are three fully speculative projects underway including the
650,000 square feet 2+U project at 1201 2nd Avenue in the
CBD and the 600,000 square feet 333 Dexter Avenue in Lake
Union, both of which are due to come online in the first half of
2019.
Colliers International
Stephen Newbold 666 Fifth Avenue
National Director of Office Research | USA New York, NY 10103
+1 202 534 3630 +1 212 716 3500
stephen.newbold@colliers.com colliers.com