The U.S. office sector continues to show improving office leasing fundamentals, despite the sustained economic slowdown, according to the Office Trends Report published byCassidy Turley, a leading commercial real estate services provider in the U.S. In fact, this sector is trending towards recovery, as net demand for office space registered at 14.9 million square feet in the third quarter of 2011, the largest quarterly gain in more than four years.

"What this report shows is that even in the most tenuous economic environment, we can have sectors and local markets that remain healthy and growing," saidKevin Thorpe, Chief Economist,Cassidy Turley. "Over the last six to nine months, everything that seemingly could have gone wrong in this recovery did go wrong, and still, businesses had enough confidence to expand into more office space."

Investment sales, however, clearly slowed in the summer months of July andAugust 2011. After averaging$5.8 billionin closed transactions in both May and June, sales decelerated to$4.0 billionin July and slid further to$3.8 billioninAugust 2011. Current economic indicators suggest a continued, but slow U.S. recovery, although the risk of a near-term recession is at 41 percent, as the European financial crisis worsens.

"Given the elevated risks, there has been a noticeable resurgence in demand for core/safe assets, accompanied by a renewed fear related to value-add assets. With the latest drop in treasury yields, core asset pricing in all markets - major, secondary and tertiary - could very well continue to surprise on the upside," saidKevin Thorpe.

Following are key highlights inCassidy Turley's U.S. Office Trends Report:

• Although 54 out of 82 markets recorded positive gains in the third quarter of 2011, these gains were largely powered by significant increases in markets located inTexasandNew York.

• The top five demand markets in the third quarter of 2011 includeNew York City(+2.4 million square feet),Houston(+984,000 square feet),Austin(+930,000 square feet),Long Island(+771,000 square feet) andDallas(+740,000 square feet).

• Average asking rents inched up4 centsin the third quarter of 2011 to$21.39.

• Projects under construction increased from 36.2 million square feet in the second quarter of 2011 to 38.9 million square feet in the third quarter of 2011.

Mr. Thorpe added, "The most imminent threat to a full U.S. recovery is the European sovereign debt crisis, which is worsening. In gauging where the U.S. office sector goes from here, all eyes need to be transfixed on daily sovereign debt yields, equity markets and policy developments."