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.
Lease Negotiations , Office Rental , Office Space , Office Vacancy Rate , Silicon Valley Office Space
Unemployment in the greater San Jose area was 11.8 percent in November.
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
"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
What has been lost in the housing talk recovery is the grim statistics that commercial real estate has fallen 37 percent in value in the last year. This wouldn’t be such a big problem aside from the tiny detail that some $3 trillion in commercial real estate loans are still outstanding. The commercial real estate debacle is already happening with defaults reaching 16 year highs. This is already occurring before many of the commercial real estate loans reach their refinance dates. In some instances banks are simply ignoring non-payment and giving borrowers a few more months or even years. Why? Because they can still claim the note is current and claim the asset at inflated values.
Full Article: The Commercial Real Estate Default Wave is Here
Commercial Real Estate , Office Space