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Entries Tagged as 'Office Vacancy Rate'

Demand for Office Space Limited

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According to a recent report from Reis, Inc, the office space vacancy rate is down only 50 basis points, to 17.1%, since peaking in 2010/2011 at 17.6% during the recession. This is due to sluggish job growth during the recovery. Unfortunately 2013 does not look as though we will see much improvement either. The job forecast shows that the jobs being created are in sectors that do not generally utilize very much office space such as construction, manufacturing, and healthcare. With all of the changes in how businesses are using office space, this could be the new norm for the office space market in the US.

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By: James Osgood

Office Space , Office Space Negotiations , Office Vacancy Rate

Office Space Market Recovery Slow but Steady

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Occupancy, Absorption Levels Hold Steady as Market Indicators Find Recovery Continuing at Slow but Steady Pace despite election jitters.

Demand for office space in the U.S. remained steady in the third quarter as leasing activity and absorption of available office space continued to pick up momentum following a lackluster start at the beginning of 2012, CoStar Group reported this week in the company's Third-Quarter 2012 Office Review & Outlook. 

The overall U.S. office vacancy rate edged down and net absorption rose to 15 million square feet during the quarter from 13 million square feet at mid-year 2012. The relatively little new office supply and continued low levels of new office construction supported the balance in supply and demand.

Meanwhile, office tenants continued to enjoy a 'holiday' from rent increases as office rents in most market have yet to budge much from their market trough tipping point, according to analysts for Property and Portfolio Research (PPR), CoStar’s analytics and forecasting division. 

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Office Space , Office Space Negotiations , Office Vacancy Rate

Mid-Year Office Space Market Report for the US

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Costar's Mid-year National Office Space Report is out with some very interesting and comprehensive information included. The report is a very interesting read. It starts out with a broad overview:

"The U.S. Office market ended the second quarter 2012 with a vacancy rate of 12.1%.  The vacancy rate was down over the previous quarter, with net absorption totaling positive 20,718,242 square feet in the second quarter.  Vacant sublease space decreased in the quarter, ending the quarter at 48,602,935 square feet.  Rental rates ended the second quarter at $21.38, an increase over the previous quarter.  A total of 160 buildings delivered to the market in the quarter totaling 6,946,279 square feet, with 59,338,973 square feet still under construction at the end of the quarter."

But it also gets into much more detailed information by office market. I thought that one of the more interesting charts included was that of the historical office space rental rates. 
Historical office psace rates
Just a little bit of a roll since 4Q 2000 and has been pretty flat over the past 6 quarters. If I were a pure technician, I would say the chart is getting ready to bump up again. We will see.

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

What Does it Mean to be an Office Tenant in an Improving Market?

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After some really bad times, the office market in US finally began a slow but steady recovery in 2011. Ryan Severino, senior economist for REIS said, “During 2011, the office vacancy rate declined by around 30 points when compared to 2010.” The result of this decline is that rental rates rose by about 1.6 percent, the first increase sine 2008. While this is not a huge increase, the recovery trend is expected to continue on a steady basis.

Office tenants in this market experience fear and doubts about where the economy is going. According to Ken Ashley, senior director of Cushman & Wakefield’s Atlanta office tenants are focusing on using floor space more efficiently, resulting in a trend for office tenants to seek out offices with less square footage, a trend called “density with dignity”.

So what does this mean to office tenants seeking to lease an office?

  • Increasing Office Rents: As noted above, the rental rates are rising slowly but steadily, so negotiating a new lease or moving to a different office space may well mean paying more per square foot than just a few months ago. Since this trend is expected to continue, if you are considering moving your office, it is better to act quickly than wait; if you delay, you will only pay more.

  • Reduced Incentives: Recently, it was an office renter’s market and renters were able to shop for incentives that appealed to their situation. For example, some landlords offered tenant improvement allowances while others offered special rates to long term renters. These incentives are very soon to be greatly reduced as the vacancy rate continues to decline and spaces fill up. Once the rental market turns a corner, the incentives will vanish completely. Again, making it the best time for tenants to make any changes being considered for the near-term future.

  • Fewer Office Space Alternatives: With changes to the rental market, the choice afforded the potential renter will be reduced. Today, many renters are seeking to move to more flexible floor plans and smaller spaces. This may well leave a wealth of larger offices at increased cost per square footage available, but this may well be exactly what you want to change for your own office. Those seeking the perfect spaces for flexible office spaces and non-traditional spaces, such as serviced office space, may find themselves at a loss for locating the space that would have readily been available only a short time ago. A matter of weeks can change the market in this area and business people take advantage of their last days of incentives and broad selections.

As with any period of recovery, whether in the commercial office market or the general economy, it is difficult to see into the future. But trends today give us the best insight into where you may find your business rental needs in the near-term future. Today is the best time to make a move and only a few months from now may be entirely too late to reap the benefits remaining

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By: James Osgood

Office Leasing Tips , Office Rental , Office Space Negotiations , Office Vacancy Rate

NAR Predicting Improvement in Office Space Market & Increasing Rents

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The NAR quarterly forecast reports that all commercial real estate sectors are on the upswing. Their predictions include that the US office space vacancy will decline by 0.4% to 16% by the 1st quarter 2013. According to the report, office rents are expected to rise by 1.9 percent this year and 2.4 percent in 2013, with net absorption predicted to hit 20.1 million in 2012 and 28.1 million next year. More...

Washington, DC, currently has the lowest office space vacancy rate at 9.5%, with New York City in second place at 10% and, surprisingly, New Orleans at 12.4%. More Office Space Market Information.

What this means to office tenants is that now is the time to lock in long term rental rates to ensure you benefit from the bottom of the market. The best way to do so is by engaging the services of an office tenant representative who can show you how to take advantage of the current low office rental rates. There is no cost to tenants to obtain the services of a tenant rep, so there is no reason not to investigate what they can do for you. It is a no lose proposition.

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