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Entries Tagged as 'Office Vacancy Rate'

Markets with the Biggest 1Q Jumps in Vacancy Rates and Declines in Rental Rates

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OC Register - Orange County office rents fell at an 8.7% annual rate in the first quarter — 2nd worst drop among 79 U.S. markets tracked by commercial real estate analysts at Reis Inc.

Reis pegged typical Orange County office rents at $27.12 per square foot after tumbling in the past year. Only New York — with its $54 rents after a 12.4% cut in a year — had a bigger drop. (Nationally, rents fell 4.2% in the past year!)

One reason for the Orange County rent cuts was a flood of empty offices. Reis put Orange County office vacancy at 19.6% off all space — up 3.8 percentage points in a year. (Nationally, vacancy ran 17.3% in Q1 — up 2.1 percentage points in a year.)

Only 5 U.S. markets had bigger jumps in their vacancy rates:

    * Seattle: 17.1% Q1 vacancy — up 5.1 percentage points in a year.
    * Phoenix: 25.2%  vacancy — up 4.6 points.
    * Las Vegas: 24.2% vacancy — up 4.3 points.
    * Fairfield (Conn.): 19.2% vacancy — up 4.3 points.
    * Ft. Lauderdale: 20.3% vacancy — up 4.2 points.

Victor Calanog, Reis’ director of research, on the national outlook; “Reis does not expect vacancies to begin declining until 2011. It may take another quarter or two after that for positive rent growth to resume. 2010 will be marked by rising vacancies and negative rent growth, but as the overall economy and labor markets continue to recover, the magnitudes of decline should be far less relative to what we recorded in 2009.”

Office Vacancy Rate , Orange County Office Space , Phoenix Office Space , Seattle Office Space

Medical Office Space will be Expanding...by 2014

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By the end of the decade, droves of previously uninsured Americans will be heading to the doctor’s office as result of health care reform.

But where will they be treated?

Doctors with private practices will soon need larger spaces. And amid a dismal year for commercial real estate, brokers and landlords that specialize in medical space are banking on that growth.

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Blogger's Note: A bit of good news among all the negatives.  Unfortunately, the medical office space won't be needed until after the current recession ends and the new Health Care Legislation take effect in 2014. The author of the article was a bit optimistic about the "end of the decade."

Medical Office Space , Office Rental , Office Space , Office Vacancy Rate

Office Market Nearing Stabilization as Economy Improves

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PR NewswireST. LOUIS, April 14 /PRNewswire/ -- The latest data for the first quarter of 2010 shows that demand for U.S. office space continues to improve, according to Cassidy Turley, one of the largest commercial real estate service providers in the U.S. 

Net absorption registered at negative 3.2 million square feet in the first quarter of 2010, marking the 5th straight quarter of decelerating declines.

"The first leg of the recovery begins when the office market returns to positive demand.  The trajectory of recent job growth figures indicates that the U.S. economy will be consuming office space again by the second or third quarter of 2010," said Kevin Thorpe, Chief Economist at Cassidy Turley. "In other words, the office sector has not yet turned the corner, but it is at the cusp."

Despite decelerating declines in demand, the report reveals that the national office vacancy rate increased from 16.4% in the fourth quarter of 2009 to 16.6% in the first quarter of 2010, which is the highest vacancy rate since 2003.

"National vacancy remains elevated; it is now 260 basis points above its historical average," said Mr. Thorpe.  "With a myriad of high-quality options for tenants to choose from, effective rents will remain low until the excess space is absorbed.  It is a classic inventory overhang problem that can only be resolved with steady economic growth and time." 

Net effective rents remained flat in the first quarter of 2010 at $23.88 – marking the first time in five straight quarters that rents did not decline. 

"Based on the vacant stock figures, the U.S. is no less than 2 years away from seeing healthy rent growth again, but certain pockets within top tier markets will firm before then," added Mr. Thorpe.  

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Blogger's note: I wish the economy were improving. What we are told and what we see are two differnt things. I think we still have more declines in rental rates as the commercial market continues it's downward trend for at least the remainder of the year. There are still a lot of building owners with refinanincing needs coming up this year that are not going to be able to be met. I do not believe we have hit bottom, yet.

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

JLL Sees Recovery Signs for Office Market

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CHICAGO-Signs of a national office market recovery, including the peaking of sublease space and rents bottoming out, began appearing this year, according to Jones Lang LaSalle in its First Quarter 2010 North American Office Outlook. However, company research experts believe that though confidence is returning, job growth will be slow to recover until at least the beginning of 2011.

The national office vacancy rate rose by 20 basis points to 18.3% in Q1 2010, but this increase was relatively stable compared to the vast losses of space, more than 200 basis points, from quarter to quarter in 2009, said JLL officials. Also, the amount of available sublease space nationwide has dropped for the past two quarters, says John Sikaitis, JLL’s director of national office research.

However, the amount of shadow space, offices leased by tenants but not used, has grown at large firms, Sikaitis tells GlobeSt.com. “Many large corporate tenants have excess space, in excess of 9%, that will absorb any new growth this year,” he says. “For example, when company X goes out and hires 10 people in the next three-to-six months, they won’t need more room. Because of this, we believe the first wave of growth is not going to result in much occupancy gains.”

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Office Rental , Office Space , Office Vacancy Rate

Shedding the Light on Shadow Office Space and the True 19% US Office Vacancy Rate

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Shadow Office Space is office space that is currently under lease by a tenant, but which is not being used due to layoff of employees. It is also not listed for sublease or identified as available space. This could be space that a company is holding so that as the economy comes back they will have the space they need to get back to their “normal” workforce.  Most office leases are long term leases and shadow office space could be that space within a leased premise that is not being used, but is not suitable for sublease due to the layout and / or security concerns of a company.  It is also space that will be put on the market, but has not yet been offered.  This is space that is hidden from the vacancy rate statistics we hear about.  It can be compared to the unemployment figures that come out, but do not include the underemployed or those that have given up looking for a job. In other words, it should be added to the published vacancy rates in order to determine the true office vacancy rate.

Shadow office space will most likely the first space to be filled as the economy comes back. This will also distort the absorption rates. With no record of it being vacant, there will be no record of it being filled with new employees. When the office recovery finally does come, it will be under stated. 

How much is out there? This is a very tough question to answer without a large survey of businesses to determine their current space usage related to their leased space. Based upon our discussions with local OfficeFinder Tenant reps, the true vacancy rate, including shadow space would be 1% – 2% higher than the stated rate in any given market. That means that the Manhattan market would have in excess of 2.5 million square feet of shadow office space; not an insignificant amount of space.

From our recent post, US Office Vacancy Rate Hits 16-year High, the stated vacancy rate was 17.2%. Including a Shadow Space factor, the real US Vacancy Rate would be close to 19%.

What this means to tenants is that there are lots of great opportunities that they can take advantage of. One of the biggest problems for them is the ability to cull through the many options to find the right alternatives.  That’s where engaging a tenant representative comes in. They know the market. They know the landlords. They do this every day and can help tenants find and negotiate for the best options available. Best of all, tenants get representation at no cost to them. Listing agent fees are split to pay for their services.

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Lease Negotiations , Manhattan Office Space , New York Office Space , Office Rental , Office Space , Office Space Negotiations , Office Vacancy Rate , Sublease Office Space , Tenant Representation