Which of the following is a component that could lead to increased vacancy rates?

Excess new construction is indeed a key factor that can lead to increased vacancy rates in the commercial real estate market. When there is a significant amount of new office space built without a corresponding increase in demand, this can easily outpace the needs of businesses. As a result, there can be more available spaces than tenants looking for them, which leads to higher vacancy rates.

The situation becomes exacerbated in markets where demand for office space does not rise correspondingly, or if it even declines, which can happen due to economic changes, shifts in industry needs, or disruptions like remote work trends. When too much space is created too quickly, it can often take a long time for the market to absorb that new inventory, causing a surplus of unoccupied properties.

In contrast, new demand for office space and improvements in local employment rates typically foster a healthier rental market, often resulting in lower vacancy rates. Likewise, a decrease in rental prices usually stimulates more interest in leasing spaces, which can reduce vacancy rates, rather than increase them. Therefore, excess new construction specifically creates a situation where there is a mismatch between supply and demand, leading to higher vacancy rates.