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Entries Tagged as 'Office Vacancy Rate'

Washington DC Claims the Title of Most Expensive Office Rental in the US

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In a recent article in Inc Magazine, Office Space in Washington DC won the most expensive office rental in the US award at an average rate of just under $49.00 per square foot. New York City Office Space was second at $48.53 per square foot. For comparison, the national average is $21.25 per square foot.

The national office space vacancy rate improved to 16.8%

Read more at Inc Magazine

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Manhattan Office Space , New York Office Space , Office Vacancy Rate , Washington DC Office Space

Five Years Before Office Space Market Recovers?

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In  a recent Blog post by James Quinn, a senior director of strategic planning for a major university, the time period of the office space market recovery is questioned and predicted to be much longer than many industry experts predict.  The main reason for his prediction is his belief that consumers are beginning to "Deleverage," spending less, and it will cause major changes in the economy over the next decade.

"They have no choice. Boomers have come to the shocking realization that you can’t get wealthy or retire by borrowing and spending."

His thoughts on the Office Space market:

"The current office vacancy rate of 17.5% is the highest since 1993 and is just below the all-time high 18.7% in 1992. The WSJ has concluded, with no data or analysis, that the vacancy rate has bottomed. As the employment data proves, companies are not hiring employees. New companies are not being formed. Government mandates and regulations regarding healthcare and uncertainty about taxes will keep the formation of new small companies at a minimum. Conglomerates continue to ship jobs overseas. Part 2 of this Depression will drive more companies out of business. Office vacancies will remain at record levels for the next five years."

On the other side the Wall Street Journal came out with an article, Signs of Recovery For Office Market, last week that predicts that the office space market has bottomed out and that we are starting see some stabilization in the market. They also state that the recovery will be a slow one, but don't define how long that could be.

For us at OfficeFinder.com, over the past 3 weeks we have seen a surge in closed deal reporting in the neighborhood of 2 - 3 times over those of the previous several months. These reports come through our network of office space tenant representatives and executive suite members. We are hoping this continues and identifies the start of the small business recovery.

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

Medical Office Space in High Demand in Slow Office Market

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Everyone may be talking about the weak office market but there are areas in which the demand for office space remains strong and is even growing. The services of health care providers are required, regardless of the economy or real estate values and many realty professionals are making the most if this opportunity.

With the coming implementation of the Affordable Health Care Act, signed by President Obama on March 23, 2010, it is nearly certain that the high demand for medical and health care-related office space will continue.  As the American public gains access to affordable medical, dental, and other forms of health care, more and more facilities and practitioners will be required to care for those who, in the past, have not sought or have severely limited use of health care services.

In some areas the overall office vacancy rate is as high as 25%, yet, the medical office space made up over 26% of the total leasing of office space in those same areas. According to David Scherer, manager of one-half million square feet of medical office space in Nevada, “Medical office space is recession resistant due to the fact that people need medical procedures through good and bad economic times. There wasn't as much speculative building with medical office space during the real estate boom, since it typically needs to be located next to a hospital, which makes it naturally supply constrained.”

Because medical offices are seeking new, more convenient locations to better provide services to their patients, the demand for medical office space is no longer constrained by the need to locate near a hospital. As health care becomes more available to American, medical offices are spreading into suburban areas, shopping centers, and other non-traditional medical office locations, driving the demand for medical office leasing even higher.
The average rents for medical office space has also dropped significantly during the past year, allowing health care providers to expand their office space as well as add additional locations to their practices. In addition, some medical practitioners are concerned about the implications of the health care act, has resulted in medical professionals choosing to lease office space rather than purchase existing facilities or building new structures.

With the health care legislation providing drive for the future of many medical practices, healthcare professionals are taking advantage of the tenant’s market. Incentives are often available with office space leases, such as tenant improvements, waived maintenance fees, or even free rent for a period of time, it only makes sense that businesses such as health care providers will benefit from the slow office market.

Due to slow reimbursements from government-provided health care, such as Medicare and Medicaid, as well as many private insurance providers, combined with the desire to reduce overhead costs, some practitioners have consolidated their practices in order to gain more negotiating power, resulting in the need for larger facilities and additional medical office space.   Locating the right medical offices for these larger practices, combined with other factors, has worked together to keep the medical office space market robust even during slow times for the overall office space market.

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Medical Office Space , Office Vacancy Rate

Next Year WIll Be Better For The US Office Space Market

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The office vacancy rate in the US is the highest it has been in 17 years, since 1993. Effective rents were lower in the 2nd quarter as the office space market continues to struggle. It is not all bad news. The negative trend is slowing.  In other words the vacancy rate is increasing at a slower rate and the bottom may be in site.

According a study published by the National Real Estate Investor magazine, "There is reason to be optimistic about the fate of office properties. A turnaround may yet happen later this year, but the real recovery will come to fruition next year"

Office Space , Office Vacancy Rate

Office Space Demand Exceeds Returned Office Space

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This is the second recent report of positive news in the Office Space arena. Just a few days ago we posted Office Space Vacancy Rates in US CBDs Fall Slightly, now this. Hopefully it will be the first few of more to come.

WASHINGTON, July 12 /PRNewswire/ -- For the first time in two years, the demand for office space exceeded what was returned to the market, according to Cassidy Turley's latest National Office Trends Report.

Cassidy Turley reports that with demand up, national office vacancy rates remained flat when compared to the previous quarter at 16.9%. Still, this is the highest vacancy has been since 1993. Of the 80 major metros tracked, 40 posted increases in vacancy and 35 markets posted declines.

According to the report, national rents are stabilizing, but not appreciating. Average asking rents fell slightly, down $0.17 compared to the pervious quarter, to register at $21.56 in the second quarter of 2010.

"In terms of recovery in the office market sector the fundamentals have improved, the demand has improved - especially in Washington, DC, New York City, and pockets of California," said Kevin Thorpe, Chief Economist at Cassidy Turley. "These are the segments of the market that are clearly outperforming the rest of the country. Investors are targeting quality assets in these markets and pricing has moved up dramatically from the low point it hit in 2009."

According to Cassidy Turley, the U.S. economy created 116,000 office-using jobs in the second quarter of 2010.  However, recent economic data suggests that the economy may be losing steam as we enter into the second half of 2010.  Private sector job creation, in particular, has been disappointing in the May and June employment reports. Even under bullish economic scenarios, unemployment will not reach pre-recession levels prior to 2013.

Cassidy Turley reports that U.S. office sales volume is up 39% compared to this same period one year-ago – at $7.42 billion. Net absorption was positive 6.6 million square feet in the second quarter of 2010, marking the first period of positive demand since the first quarter of 2008.

The report also finds that the development pipeline has slowed dramatically.  There is currently 32.8 million square feet under construction, compared to 41 million square feet delivered in 2009 and 61.1 million square feet delivered in 2008.

"The growing uncertainty regarding the recovery and surrounding the regulatory environment will slow the recovery in the office sector, but it will not derail it," added Mr. Thorpe.  "Office-using job growth will continue to be slow in 2010, but as businesses regain confidence in the self-sustaining expansion, hiring will pick up in greater numbers in 2011 in order to keep pace with growing demand.  For the office market, 2010 will be the year of positive demand for office space, 2011 will be the year of stabilizing vacancy, and 2012 will be the year of rental appreciation."

Manhattan Office Space , New York Office Space , Office Space , Office Vacancy Rate , Washington DC Office Space