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Shadow Office Space and the Office Market Recovery

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Over the past nine months we have made numerous posts on the effect that shadow office space will have on the office space market recovery. In a recent article from CNBC some numbers show the effect that shadow office space will have on the market. According to Co-star shadow space is adding as much as 7 percent to the Los Angeles office vacancy rates and over 6 percent in Chicago. This is likely to be the case in most markets. The problem with shadow office space is that before the market can see a full recovery, shadow office space will need to be absorbed.  Typically, shadow office space is space that a company still has under lease, but is not in use. Before these companies who have shadow space will go out into the market to lease additional office space, they will need to fill their shadow space.

Additionally, Grub and Ellis is predicting that as the market recovers shadow space will account for about 1/3 of the increased demand in 2011 and 1/4 of the office space demand in 2012, thereby dampening the office space market recovery. The good news is that we are starting to see positive absorption. As the jobs come back, the office market will improve.

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