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."