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Entries Tagged as 'Office Rental'

Silicon Valley, Ca - Vacant Office space equal 15 Empire State Buildings

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A Bloomberg news report says Silicon Valley has the biggest office space glut since the dot-com bust, leaving the U.S. technology hub with empty high-rises and office parks that make it impossible for landlords to sustain average rents.

More than 43 million square feet of office space stood vacant in the third quarter of last year -- that's the equivalent to 15 Empire State buildings and a vacancy rate over 21% for the silicon valley area.

Asking rents averaged $34.56 a square foot for Class A space in the third quarter, 21 percent less than a year earlier. The rate for flex space was $14.16 a square foot, down 16 percent, according to CB Richard Ellis.

Commercial property foreclosures will at least double in 2010 and job growth is not expected to return for two years after that, held back by U.S. consumers who are saving more and changing their spending habits.

Unemployment in the greater San Jose area was 11.8 percent in November.

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Lease Negotiations , Office Rental , Office Space , Office Vacancy Rate , Silicon Valley Office Space

Will The Office Market Reach Bottom In 2010?

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From Cushman and Wakefiled's Knowledge Center

"THE AMERICAS: LOOKING UP

Things are looking up for a recovery and job growth in 2010 that will benefit North American real estate markets. Meanwhile, South American countries such as Brazil will continue to heat up.

National real estate markets are likely to remain weak particularly early in the year due to uncertainty about the strength of the recovery. This will benefit tenants seeking to secure moderately priced space.

But as recovery takes hold, markets will reach a bottom and begin to improve. The key will be employment growth which, because of the depth of the downturn, may turn out to be stronger than is generally anticipated."

What struck me in this quick overview is that the bottom is a ways away. With last weeks jump in newly laid-off workers filing claims for unemployment benefits, the recovery may be further away than we hope. Unemployment is directly linked with office vacancy. Businesses must add employees to take on additional office space. I believe that there is still a lot of underutilized office space that companies have leases on, but are not using that will have to be filled before we see any reduction in the office vacancy rate. A recovery in 2010 would be great, but I believe the Office Space market will not start it's recovery until 2011.

I am off next week. Happy Holiday to all.

 

 

Commercial Real Estate , Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate

Office Space Tenants Are In A Cost Cutting Mode

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"Cost cutting is still going to be the highest priority" for corporate real estate in 2010, Peter Riguardi, president of Jones Lang LaSalle’s New York region, said in a webcast on office occupier trends Wednesday afternoon. That’s because economizing remains a watchword for many companies, and reducing real estate expenses--whether through blend-and-extend leases or outright shedding of space--represents low-hanging fruit.

Blending and extending, which has come back into favor in the current leasing market, will remain a big trend for the foreseeable future, Riguardi said. It’s one of many opportunities for tenants in these days of reduced rents and greater landlord concessions. The current climate also offers plenty of chances for upgrading the location and the space, and for using market leverage to enhance non-economic lease provisions.

Full Article: For Tenants, It’s About Shaving Costs

Another contributor to the problems to come in the Commercial Real Estate market.

Commercial Real Estate , Lease Negotiations , New York Office Space , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate , Tenant Representation

Bad News from Fed for Office Space Recovery

According to new projections released Tuesday, top Federal Reserve officials expect unemployment to remain elevated for years to come, suggesting that the economic recovery will be too gradual to create rapid improvement in the job market.

The forecast of 17 top Fed officials anticipates that unemployment rate will still be in the 6.8 to 7.5 percent range at the end of 2012. With a 10.2 percent rate in October, it is an improvement, but a slow one to get down to a healthy level of around 5%.  They stated that they "anticipated that about five or six years would be needed for the economy to converge fully to a longer run path."

As we have discussed in previous posts, the office space recovery is linked with employment.  If there are no new jobs or a slow growth in jobs, office space vacancy will remain high. What this message tells us, if it turns out to be accurate, is that the office space recovery will take at least five to six years going hand in hand with employment growth.

So what does this mean to businesses looking for office space for lease? It means that it will be a tenants market for the next five to six years with rates perhaps dropping a little in the short term and remaining stable for at least the next few years.

Businesses can make sure to take advantage of this opportunity by obtaining the services, at no cost, of a qualified tenant representative.

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Office Relocation , Office Rental , Office Space , Office Vacancy Rate , Tenant Representation

Jones Lang LaSalle Predicts mid 2010 CRE Recovery

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Washington Business Journal Thursday, November 19, 2009: The initial U.S. commercial real estate recovery is likely to begin in the second half of next year, according to Jones Lang LaSalle’s 2010 forecast.

Nationally, leasing demand levels are expected to bottom out this quarter and remain stagnant next year. And national office vacancy are expected to near 20 percent by late 2010.

D.C., which has a 12.3 percent vacancy rate that includes sublease space, is expected to come close to topping out at about 15 percent before stabilizing, said John Sikaitis, research manager in the D.C. office of JLL.

“We have significant supply issues with a large development pipeline but significant demand with the government looking to mitigate the problem,” said Sikaitis.

Expected boosts in the federal budget will continue to cushion the D.C. office market and shift absorption back into positive territory in 2010.

But the continued delivery of speculative construction projects in the area is expected to force vacancy rates further upward and keep leverage squarely with tenants, said JLL.

The D.C. area’s 15.5 percent vacancy rate is expected to escalate to 17 percent by the end of 2010.

Northern Virginia’s rate of 16.5 percent is expected to go up slightly to 17.2 percent and in suburban Maryland, its 18.5 percent rate is expected to go up to north of 19 percent, added Sikaitis.

One region that’s fairly tight, he said, is the Rosslyn-Ballston corridor which “outperforms the rest of the region” based on the lack of development activity and tenant demand from D.C. and areas outside the beltway.

Rental rates are expected to keep dropping through the first half of 2010 but will stabilize in the third quarter due to pent-up federal demand soaking up large blocks of vacancy in the market, said JLL.

The region’s asking rents have already come down about 12 percent since the height was established at the beginning of 2008, he said. Effective rates -- which includes rental concessions -- have come down even further, at 20 percent, and are expected to see a 25 percent decline.
End article

It looks like conditions will get really ugly in the DC area before a turnaround, even if JLL is correct on a recovery mid 2010.

Office Rental , Office Space , Office Vacancy Rate , Washington DC Office Space