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Entries Tagged as 'Office Vacancy Rate'

Office Space Vacancy Rates in US CBDs Fall Slightly

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Bloomberg July 8, 2010 - Office space vacancies in U.S. central business areas fell in the second quarter from the prior three months, the first drop since 2007, as companies hired workers and took advantage of lower office space rents, Cushman & Wakefield said.

The average vacancy rate in central business districts fell to 14.8 percent from 15 percent at the end of the first quarter, the New York-based broker said today. Sixteen of the 31 cities tracked by Cushman had declines in vacancies, the company said.

“Markets throughout the U.S. continue to strengthen, as it becomes strongly apparent that the national vacancy rate for CBDs has peaked,” Maria Sicola, executive managing director and head of Americas research for Cushman, said in a statement.

Office vacancies in both central business districts and suburban areas rose to 17.4 percent in the second quarter, the highest since 1993, New York-based research company Reis Inc. said July 6. Cushman’s figures are for central business districts in cities including New York, Washington, D.C., Philadelphia, Boston and San Francisco.

Some office landlords cut their rents to fill space, Cushman said. The average rent fell to $36.49 a square foot from $36.88 in the first quarter. Nineteen of the 31 districts covered in the survey had quarterly declines in rates and 13 of those had drops of less than 3 percent, a smaller decline than in past quarters, Cushman said.

‘Nearing Bottom’

“While there is still substantial competition among landlords to offer the best deal to prospective tenants, rental rates are nearing a bottom in several markets,” Sicola said.

The U.S. has added 882,000 jobs since the beginning of the year, according to the Labor Department. The drop in office vacancies in the second quarter followed nine straight increases dating back to the last three months of 2007, when the rate bottomed out at 9.7 percent, Cushman said.

Manhattan’s three submarkets -- Midtown, Midtown South and Downtown -- had the lowest vacancy rates among the central business districts tracked by Cushman. Midtown South’s vacancy rate fell to 9.3 percent from 9.9 percent in the first quarter, Downtown’s rate was little changed at 9.9 percent and Midtown’s rate declined to 11.5 percent from 12.6 percent.

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Manhattan Office Space , New York Office Space , Office Rental , Office Space , Office Vacancy Rate

A GREAT Time to Renegotiate Your Office Space Lease

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With office space vacancy rates at recent time highs, office rental rates down as much as 30% in many office markets and no bottom found in the woes for office building owners, now is a great time to renegotiate your lease. Even if you have 2 or more years left on your current office lease you may be surprised at the willingness of landlords to renegotiate. It is not a market specific phenomena, but one that is nationwide. It doesn't matter if you lease office space in Manhattan, Chicago, Houston, Denver, Los Angeles or even small markets such as Fresno, Raleigh or Rochester. Every office space market has been affected.   Many office building owners are having financial difficulties not only on the occupancy side, but also on the mortgage side. If a landlord has a refinance coming due, you may find yourself in a great position to blend and extend.  What this means is that you would extend your office space lease for another 3 to 5 years at a lower rate in order for the landlord to show to their office building lender that they have long term office space tenants.  No office building owner will agree to reducing a financially strong tenant's rent, unless the restructured agreement provides them with some sort of economic benefit. In this case while you are paying less rent, it turns out to be a win-win situation since your new lease will help in the refinance process for the office building owner.

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50% Office Space Vacancy Rate for a Major Market?

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We think we have it tough in the US with vacancy rates in the mid to upper teens.

According to a report in ArabianBusiness.com, "Office vacancy rates in Dubai are expected to exceed 50 percent over the next year as new supply continues to be released, a new report by Jones Lang Lasalle has said. The study said city-wide vacancy rates have increased to around 38 percent with levels set to rise further."

By comparison, the US is in pretty good shape. Even Detroit has an office space vacancy better than that; at around 30%. The deals being made in Dubai must be pretty spectacualr with a vacancy rate that high.

Office Space , Office Vacancy Rate

NAR on 2010 - Office Space Vacancy to Increase. Office Space Rental Rates to Decrease

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WASHINGTON, DC--(Marketwire - May 26, 2010) -  Vacancy rates continue to rise in most commercial sectors and are not expected to level out in most markets until the end of this year or early 2011, according to the National Association of Realtors®.

Lawrence Yun, NAR chief economist, said there is one bright spot in commercial real estate. "The multifamily sector can expect increased demand as the economy creates jobs and new households are formed, likely in the second half of this year," he said. "However, the office, warehouse and retail sectors continue to experience the delayed effects of the recession. These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011."

The Society of Industrial and Office Realtors®, in its SIOR Commercial Real Estate Index, an attitudinal survey of nearly 700 local market experts,(1) confirms that significant fallout from the recession remains, but to a lesser extent.

The SIOR index, measuring 10 variables, increased 2.7 percentage points to 38.2 in the first quarter, compared with a level of 100 that represents a balanced marketplace. This is the second gain following nearly three years of declines; the last time the market was in equilibrium was in the third quarter of 2007.

Development activity remains at a standstill with nine out of 10 respondents saying that it is virtually nonexistent in their markets.

Looking at the overall market, commercial vacancy rates appear to be approaching a plateau, according to NAR's latest COMMERCIAL REAL ESTATE OUTLOOK. The NAR forecast for four major commercial sectors analyzes quarterly data in the office, industrial, retail and multifamily markets. Historic data were provided by CBRE Econometric Advisors.

Office Market
With an elevated level of sublease space available, vacancy rates in the office sector are projected to increase from 16.9 percent in the first quarter of this year to 17.6 percent in the first quarter of 2011, but should ease later next year.

Annual office rent is likely to fall 2.3 percent this year and decline another 2.1 percent in 2011. In 57 markets tracked, net absorption of office space, which includes the leasing of new space coming on the market as well as space in existing properties, is forecast to be a negative 24.6 million square feet this year and then a positive 25.5 million in 2011.

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

38% of an Office is not Utilized Yet Consumes Resources

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National Green Office Week is focusing public attention on the need for greater environmental sensitivity at work.  But if a real green contribution is to be made, then firms need to look at their office facilities and understand the level to which they are really used.

A study by workplace solutions provider Regus has shown that around 38% of office space is not utilised at any given time.  However, from an environmental point of view, that space is being heated, lit and otherwise consuming energy, whether staff are using it or not.  Therefore office businesses in South Africa need to examine the ways in which they provide workspace facilities in order to better align facilities with actual occupancy, and eliminate the wastage of huge amounts of energy each year.

Various studies have identified that each employee in a service industry business consumes energy equivalent to two tonnes of carbon emission each year.  If the Regus study’s findings about office under-utilisation are combined with these third party statistics on employee workspace energy consumption, then across South Africa’s 3 million office workers, over 2 million tonnes of carbon is being unnecessarily emitted every year.  South African businesses are also wasting money on energy consumption for office space that simply isn’t being used Business’s rands-and-cents perspective on green issues is spotlighted by Joanne Bushell at Regus South Africa.

She notes: “Being smart about the workspace you provide delivers ‘greenback’ to the environment and into your bottom line.  How compelling an argument is that?  Good environmental practice is good business.  But it requires businesses to take a step back and strategically review how they provide employees with workspace.
 
Smart firms are already adopting hybrid solutions that relieve them from the wastage inherent in traditional long-term leases.  Traditional office property arrangements may be retained for the inner core of a company’s administration.  However, the recent global recession has taught us all that firms need to become smarter, more agile and able to morph quickly with volatile and rapidly changing markets.  We need to make sure that our workspace arrangements are totally aligned with the ability to scale and change at the rate that keeps business competitive in the 21st century.  In addition, smart, cost-effective workspace solutions cut carbon emissions, energy costs and waste.”

Bushell, Johannesburg-based Regus vice-president, Middle East and Africa, adds: “Local firms are keen to optimise the economic upturn without renting more space and adding to fixed overheads.
 
“Office space is not only a major cost, it’s also a big user of electricity, air-conditioning and heating fuel – again underlining the relationship between the carbon footprint and the bottom line.”

Source: EPROP

Bolgger's note: Although this is specific to South Africa, it can be apllied to office space everywhere else as well.

Green Office , Office Space , Office Space Design , Office Vacancy Rate