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US Office Vacancy Rate Hits 16-year High

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NEW YORK (Reuters) – The U.S. office vacancy rate  in the first quarter reached its highest level in 16 years, but the decline in rents eased and crept closer to stabilization, according to a report by real estate research firm Reis Inc.

The U.S. office vacancy rate rose to 17.2 percent, a level unseen since 1994, as the market lost about 11.6 million net square feet of occupied space during the first quarter, according to the report released on Monday. The U.S. vacancy rate inched up 0.2 percentage points from a quarter earlier and was 2 percent higher than a year ago.

"As labor markets stabilize, we expect occupancies and rents to require another 12 to 18 months before showing signs of improvement, given typical lags in commercial real estate," Reis director of research Victor Calanog said in a statement. "Even as occupancy continues to deteriorate, we're observing signs of renewed leasing activity across different metros."

The U.S. office vacancy rate hit a cyclical low of 12.5 percent in the third quarter 2007.

Rental rates fell an average of 0.8 percent in the first quarter, a less steep decline that seen last year. Asking rent fell 4.2 percent from a year earlier. Factoring months of free rent and landlord contributions to space improvements for each tenant, effective rent was down 7.4 percent from a year earlier.

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