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Jones Lang LaSalle Predicts mid 2010 CRE Recovery

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Washington Business Journal Thursday, November 19, 2009: The initial U.S. commercial real estate recovery is likely to begin in the second half of next year, according to Jones Lang LaSalle’s 2010 forecast.

Nationally, leasing demand levels are expected to bottom out this quarter and remain stagnant next year. And national office vacancy are expected to near 20 percent by late 2010.

D.C., which has a 12.3 percent vacancy rate that includes sublease space, is expected to come close to topping out at about 15 percent before stabilizing, said John Sikaitis, research manager in the D.C. office of JLL.

“We have significant supply issues with a large development pipeline but significant demand with the government looking to mitigate the problem,” said Sikaitis.

Expected boosts in the federal budget will continue to cushion the D.C. office market and shift absorption back into positive territory in 2010.

But the continued delivery of speculative construction projects in the area is expected to force vacancy rates further upward and keep leverage squarely with tenants, said JLL.

The D.C. area’s 15.5 percent vacancy rate is expected to escalate to 17 percent by the end of 2010.

Northern Virginia’s rate of 16.5 percent is expected to go up slightly to 17.2 percent and in suburban Maryland, its 18.5 percent rate is expected to go up to north of 19 percent, added Sikaitis.

One region that’s fairly tight, he said, is the Rosslyn-Ballston corridor which “outperforms the rest of the region” based on the lack of development activity and tenant demand from D.C. and areas outside the beltway.

Rental rates are expected to keep dropping through the first half of 2010 but will stabilize in the third quarter due to pent-up federal demand soaking up large blocks of vacancy in the market, said JLL.

The region’s asking rents have already come down about 12 percent since the height was established at the beginning of 2008, he said. Effective rates -- which includes rental concessions -- have come down even further, at 20 percent, and are expected to see a 25 percent decline.
End article

It looks like conditions will get really ugly in the DC area before a turnaround, even if JLL is correct on a recovery mid 2010.

Office Rental , Office Space , Office Vacancy Rate , Washington DC Office Space

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