(Reuters) – U.S. office and apartment vacancy rates rose marginally in the second quarter from a year earlier, as property owners were yet to feel the full impact of the COVID-19 pandemic, according to real estate research firm REIS Inc.
The U.S. office vacancy rate rose to 17.1% in the second quarter from 16.8%, a year earlier, while the U.S. apartment vacancy rate inched up to 4.8% from 4.6%.
REIS said the forced work-from-home option driven by the pandemic has prompted many office planners to reconsider future needs which will impact the office market for years.
“Demand for apartments could hold steady in most metros as the housing sales market will likely bear the brunt of the downturn that the pandemic has incurred,” according to the report.
In May, U.S. home sales dropped to their lowest level in more than 9-1/2 years strengthening expectations for a sharp contraction in housing market activity in the second quarter.
REIS said that in the apartment market, the national average asking rent and effective rent rose 1.6% and 1.7% respectively, from a year ago.
The research firm said vacancies would continue to rise and forecast rent declines for the next two quarters, especially if the Paycheck Protection Program, a government initiative to help small businesses apply for forgivable loans, and unemployment insurance are not renewed.
The research firm said the U.S. retail vacancy rate was flat at 10.2% in the second quarter and even though retailers have re-opened in the last month, many may not survive a second wave of the virus.
New construction of office spaces declined to 3.3 million square feet from 10.2 million a year earlier.
Reporting by Sanjana Shivdas in Bengaluru; Editing by Amy Caren Daniel.