Office Vacancy Rates Lowest Since 2008
Commercial occupancy drives the demand for business services, from carpet cleaning to transcription. Fortunately for business service providers, offices are filling up with vacancy rates the lowest since 2008 driving demand for increased service in the sector. Tweet This In the third quarter of 2015, vacancy rates were posted at a 7-year low of 13.4%. The industry continues to show a healthy demand across all commercial property types, posting an office vacancy rate that has been flat or declined for 5 and 1/2 years.
The strong progress in the commercial market matched the continued steady improvement in the economy
National vacancy rates continue to drop, although this may vary by city across the US. Markets in California, the Southeast, and the Midwest have shown the greatest improvement over the past year. In Q2 of 2015, the cities with the lowest vacancy rates posted were in San Francisco (6.7%), Austin (8%), Nashville (8.4%), Pittsburgh (9%) and New York (9.1%). In Q3, the nation’s lowest vacancy rates were in San Francisco (6.5%), Austin (8.1%), Nashville (8.2%), Albany (8.4%) and New York (8.9%).
Business Services See a Direct Impact from Lower Vacancy Rates
Office vacancy rates are a key indicator of demand for several business services, including janitorial, carpet cleaning and business support services. During the recession, janitorial demand dropped drastically as office vacancies continued to increase. Since reporting revenues of $29.7 billion in 2009, janitorial services have grown to $36 billion in 2015, for a total of $227.7 billion over the past seven years. As these economic conditions continue to improve, the demand for janitorial services for small and large businesses (and also households) is expected to grow at an annual compound rate of 4% between 2015 and 2019. Key business growth is expected at educational and medical institutions.
Carpet and upholstery cleaning is another field dominated by small business that work with both commercial and residential clients of all sizes. Carpet and upholstery cleaners make up about 10% of the overall janitorial industry jobs. With over 55,000 janitorial and 8,000 carpet and upholstery cleaning establishments , the industry totals $40 billion annually. While janitorial services are more common, carpet cleaning produces higher revenues per employee – $90,000 compared to $40,000 for janitorial.
In addition to business services inside the office, improved vacancy rates have an effect on services outside the office – like landscaping. Landscape revenues are reported at a 7-year high of $73 billion, up 5% since the $69.5 billion reported in 2007. Economic drivers thought to influence lawn care and landscaping including a strong overall economy and increase in the housing and commercial construction market. A specific factor cited as an industry influencer is the increase in commercial property occupancy rates. Based on the current economic indicators, the landscape industry is expected to continue to grow at a rate of 3% per year over the next five years.