Office Rent Report: Major Metros Trump Small Cities

The U.S. office sector continues to rebound, according to a new report from commercial real estate services provider Cassidy Turley. And Washington, D.C., is leading the pack, having overtaken New York City for the highest office rents in the country in the third quarter of 2010.

The Third Quarter National Office Trends Report showed that office vacancy rates remained flat at 16.8 percent for the third straight quarter and rents are showing signs of stabilization. Kevin Thorpe, chief economist at Cassidy Turley, credits rising corporate profits and temporary service hiring with the greater office space demand.

But because rents typically lag economic recovery, experts predict that the office building market in smaller cities will continue to face an oversupply problem. Meanwhile, major cities where there's a significant increase in jobs—such as D.C., New York, Boston, Dallas, and San Francisco—are experiencing greater demand for office space and a surge in office building sales.