Have you seen any ads for sublease office space on MySpace? Don’t be surprised if you do. MySpace has around 420,000 square feet of office space in Playa Vista, California with a 12 year lease that is sitting empty. They are currently paying more than $1-million dollars a month for the Los Angeles area office space and have total lease obligation of about $350-million over the 12 year term. Rent is scheduled to go up to nearly $2-million next June. Needless to say, it is not a great time to have excess office space, especially true in California.
MySpace signed the 12-year lease in August 2008, when the number of people using MySpace was blossoming and the social network was running out of space in its Beverly Hills offices. The lease began in June of this year. The problem is that since then is that Facebook has taken off at the expense of MySpace. The parent company, News Corp, announced recently that they will receive $100-million less than expected from Google after failing to hit traffic targets.
News Corp also announced that they will be taking a $180-million write off “as a result of excess facility space that we no longer need.”
Los Angeles Office Space , Office Vacancy Rate , Sublease Office Space
A couple of different reports have come out this month related to the 3rd Quarter office vacancy rate nationwide. They do not match. The vacancy rate according to these reports is between 13% and 16.5%. Quite a big difference. Neither noted whether sublease space was considered or what class of space was included. Bottom line is that you can't always take these number at face value.
From the Money Times, "According to real estate research firm Reis Inc, the U.S. office vacancy rate touched a five-year high in the third quarter. The national vacancy rate stood at 16.5 percent, 0.6 percentage higher than the previous quarter.
The dismal vacancy rate
The present vacancy rate is 2.3 percentage points higher than the vacancy rate in the comparative period last year. Thus the gains made during the commercial real estate boom have been washed away.
"So in seven quarters, the current recession has almost undone all additions to occupied space that occurred during the years when office rents peaked," Calanog said.
The office vacancy rate increased in 72 of the 79 primary metropolitan areas, up from 66 primary metropolitan areas that witnessed an increase in the vacancy rate last quarter."
From CoStar "Vacancy is continuing to rise in most major office markets around the nation. According to a third quarter market report produced by CoStar, overall vacancy in the United State climbed to 13 percent, which was an increase of 40 basis points from the second quarter’s vacancy of 12.6 percent.
Year-to-date statistics showed that the nation has seen negative absorption of 48.2 million square feet with 38 of the 63 major office markets tracked by CoStar having posted negative absorption during the third quarter. CoStar also reported central business district vacancy climbed to 11.1 percent from 10.7 percent in the second quarter. Suburban vacancy also grew to 13.6 percent, up from 13.2 percent in the second quarter."
Office Rental , Office Space , Office Vacancy Rate