With the construction pipeline all but shut down and reduced rents prompting many tenants to trade up for better or more efficient space, the U.S. office market absorbed a strong 19 million square feet in the third quarter.

The leasing activity helped lower the national office vacancy rate slightly to about 13.1% — down nearly a half percentage point since hitting its peak a year ago. Should leasing activity remain at the level seen this past quater, it would set the stage for furure rent increases, since little to new new supply is being added.  Leasing activity, which bottomed out in early 2009, increased in the third quarter as tenants signed long term commitments to lock in low rents for higher-quality Class A and B buildings. Gross leasing is now approaching levels not seen since the first Internet company boom a decade ago.

Net absorption, which has been muted at under 10 million square feet for the last few quarters, jumped to 19 million square feet in the most recent three months and is fanally beginning to reflect modest job growth generated during a volatile recovery.

The San Francisco Bay area, which has seen more of the most heavily discounted rental rates among office markets, led the contry with 4.4 million square feet of net absorption in the third quarter. Similar net absorption strength was found in markets with heavey presence of technology and energy firms.