So what’s happening in the Office Space Market throughout the US? As we have all been reading and many of us experiencing first hand, there is negative absorption in virtually every major market. And not just in the United States. You can look at almost any major market in the world and see that office vacancy rates are increasing. With my nearly 30 years in the office brokerage business, there has never been a comparable downward shift in the office market that has even come close to what we are experiencing now. We will likely see a 30% increase in the vacancy rate in the US this year; from around 13% to 17%. And 2009 does not look terribly promising following up this most recent decline.
So much of the loss of jobs that is occurring has been in the white collar arena, the people that use office space. Market trends follow employment. As manufacturing was being transferred overseas we got used to seeing blue collar jobs go by the wayside, but the white collar jobs have never suffered to anywhere near the same degree. Now as the financial institutions take big hits, we are seeing a larger percentage of white collars jobs disappear, leaving massive blocks of office space with no near term potential to fill.
It is a pretty dim outlook on the near term future of the office market. The bright side is that those companies who are in the market looking for office space will be able to drive exceptionally hard bargains. It is definitely a Tenant’s market. In fact, I have not seen a market so primed for tenants who are ready to take on space. Many landlords are still in shock and disbelief from such a fast transition from landlord’s to tenant’s market that they are not being as aggressive now as they will need to be in the coming year… if they expect to close any new deals.
On the other hand, we have found that over the past couple of months activity in the very small office markets for companies with 1 – 5 people has remained very solid. Part of this may be that those white collar workers being laid off are looking at ways to earn a living. Many could be deciding to hang their own shingle. When doing so, many decide to rent either a small office or sign on with an executive suite operator. While they are not going to eat up a lot of office space, at least there is activity.