 |
PRNewswire, 2009-04-20
by Ross Moore
Boston, MA
Vacancies continue to rise, jumping nearly one full percentage point in the first three months of the year
BOSTON, April 20 /PRNewswire/ -- The U.S. office market greeted the first three months of 2009 by continuing its downward spiral, marking the worst quarter since Q3 2001 and the 9/11 terrorist attacks, according to the Q1 office report from Colliers International, a leading global real estate services firm. As anticipated, national office vacancies kept rising - increasing by 95 basis points - from 13.80 percent at year-end 2008 to 14.75 percent at the close of the first quarter of 2009.
A significant contributor to this spiking vacancy rate was a further increase in space available for sublease, according to Colliers. Nationally, total available sublease space rose by 7.5 million square feet (msf) during Q1, registering 81.6 msf total, and representing 11.1 percent of total vacant office space. Major CBD (central business district) markets with well above-average levels of sublease space include Manhattan (29.0 percent of vacant space) and Boston (21.5 percent of vacant space). Similarly, notable suburban markets with above-average levels of sublease space include the San Francisco peninsula (28.0 percent), Northern Virginia (22.0 percent) Fairfield County/Greenwich, CT (20.0 percent) and suburban Maryland (15.0 percent).
Rising vacancies were spread relatively evenly among CBD and non-CBD markets, although non-CBD markets registered a slightly higher uptick in vacancy, per Colliers' report. Across the country, vacancies in Class A buildings rose 1.02 percentage points - from 13.86 percent in Q4'08 to 14.63 percent in Q1'09. Meanwhile, the combined vacancy rate for Class B and C properties rose 88 basis points - from 13.84 percent in Q4'08 to 14.63 percent in Q1'09. The office sub-category with the highest vacancy rate was the Suburban Class A market, clocking in at 16.45 percent.
Underscoring the severity of the current recession, all submarkets and space classes in the U.S. registered negative absorption in Q1 - that is, a net negative change in occupied space. For the U.S. as a whole, net absorption measured negative 26.7 msf, which was more than double the 11.4 msf of negative absorption recorded in Q4'08.
As for new supply, there was a moderate increase on this front during the first quarter. 15.4 msf of new construction was completed in the January through March period, almost 70 percent of which occurred in the suburbs. In terms of space under construction, at first quarter's end, 83 msf of office space was being built across the U.S., compared with 94.2 msf at the end of the fourth quarter.
"Unfortunately, not a ton of good news can be gleaned from the first quarter office numbers," remarked Ross Moore, executive vice president and director of market and economic research at Colliers International. "As jobs continue to disappear nationwide, we see a commensurate decline in office occupancy. While the effect is not immediate, the result is basically guaranteed. As we know, job losses escalated in January, February and March - and the prognosis for Q2 is for more of the same. There's little doubt that the U.S. office market will continue to slip, and we expect an additional 100 msf to be returned to the market before the cycle bottoms. Investors, lenders and owners need to be prepared for the national office vacancy rate to approach 20 percent - and we must steel ourselves for this scenario."
In terms of office rents, rates fell in almost all markets surveyed, and overall, the downtown average Class A asking rate measured $43.36 per square foot (psf; weighted), down 5.47 percent from year-end 2008. Unweighted CBD asking rents dropped a more modest 2.50 percent. The sizeable difference between weighted and unweighted rental rates takes into account the effects of large office markets such as Manhattan, Boston and San Francisco skewing the weighted average. In suburban markets, the average asking rental rate dipped to $27.69 psf (weighted), down 1.41 percent from Q4'08. Unweighted suburban rents fell 1.8 percent.
"It's important to note, though, that asking rents only tell half the story," said Moore. "Tenant incentives also increased during the first quarter, with average tenant improvements up 7.7 percent, coming in at $29.63 psf, based on a 5-year term. Free rent increased 17.7 percent to 4.3 months. All this points to how tenants are now very much in the driver's seat, as landlords become increasingly anxious to maintain occupancies."
Office Vacancy Rates, market-by-market
Downtown
VACANCY VACANCY
RATE DEC 31, RATE MAR 31,
CITY/MARKET 2008 (%) 2009 (%)
Atlanta, GA 13.40 13.28
Bakersfield, CA 6.34 6.54
Baltimore, MD 17.38 17.74
Boise, ID 9.52 9.90
Boston, MA 10.51 11.52
Charleston, SC 6.60 7.96
Charlotte, NC 2.56 4.06
Chicago, IL 12.69 13.98
Cincinnati, OH 17.32 17.43
Cleveland, OH 16.30 16.42
Columbia, SC 12.53 13.54
Columbus, OH 13.06 14.81
Dallas/Fort Worth, TX 20.59 19.70
Denver, CO 14.12 15.11
Detroit, MI 16.12 16.43
Fresno, CA 8.34 10.72
Ft. Lauderdale/Broward County, FL 14.87 15.10
Greenville, SC 23.79 23.79
Hartford, CT 14.86 16.25
Honolulu, HI 5.04 5.65
Houston, TX 12.44 12.90
Indianapolis, IN 14.90 14.77
Jacksonville, FL 10.80 10.90
Kansas City MO-KS 20.38 20.53
Las Vegas, NV 8.94 10.29
Little Rock, AR 11.71 11.56
Los Angeles, CA 14.90 14.99
Louisville, KY 7.57 7.88
Memphis, TN 11.92 12.52
Miami/Dade County, FL 14.76 15.09
Milwaukee, WI 17.54 18.62
Minneapolis/St. Paul, MN 15.78 15.85
Nashville, TN 15.80 17.30
New York, NY - Downtown Manhattan 10.21 10.22
New York, NY - Midtown Manhattan 10.14 12.44
New York, NY - Midtown South Manhattan 11.38 13.06
Oakland, CA 11.12 10.99
Orlando, FL 13.84 15.10
Philadelphia, PA 9.25 9.97
Phoenix, AZ 13.80 14.62
Pleasanton/Walnut Creek, CA 17.33 19.34
Portland, OR 7.32 8.09
Raleigh/Durham/Chapel Hill, NC 8.39 8.80
Reno, NV 21.01 21.96
Sacramento, CA 8.46 7.96
San Diego County, CA 15.34 15.13
San Francisco, CA 12.55 13.22
San Jose/Silicon Valley, CA 21.09 20.47
Santa Rosa/Sonoma County, CA 10.72 12.42
Seattle/Puget Sound, WA 9.03 9.28
St. Louis, MO 21.59 21.38
Stockton/San Joaquin County, CA 18.56 19.02
Tampa, FL 14.68 15.43
Washington, DC 7.84 8.27
West Palm Beach/Palm Beach County, FL 18.91 19.11
National Average 11.93 12.79
----------------------------------------------------------------------
Suburbs
VACANCY VACANCY
RATE DEC 31, RATE MAR 31,
CITY/MARKET 2008 (%) 2009 (%)
Atlanta, GA 15.59 15.71
Bakersfield, CA 9.15 10.64
Baltimore, MD 16.55 18.77
Boise, ID 15.94 17.08
Boston, MA 14.78 17.81
Charleston, SC 21.20 19.96
Charlotte, NC 13.38 14.76
Chicago, IL 20.93 21.76
Cincinnati, OH 21.73 22.50
Cleveland, OH 9.90 9.98
Columbia, SC 17.83 17.83
Columbus, OH 14.28 14.55
Dallas/Fort Worth, TX 16.03 15.98
Denver, CO 14.02 14.90
Detroit, MI 18.12 18.60
Fairfield, CA 24.50 25.30
Fresno, CA 13.27 13.81
Ft. Lauderdale/Broward County, FL 13.72 14.30
Greenville, SC 25.94 25.94
Hartford, CT 18.55 19.16
Honolulu, HI 7.31 7.81
Houston, TX 13.65 15.34
Indianapolis, IN 20.78 21.74
Jacksonville, FL 14.43 16.00
Kansas City MO-KS 15.59 16.33
Las Vegas, NV 21.80 23.60
Little Rock, AR 13.78 11.54
Los Angeles - Inland Empire, CA 18.40 23.29
Los Angeles, CA 10.35 14.46
Louisville, KY 16.37 16.18
Memphis, TN 13.11 13.14
Miami/Dade County, FL 12.42 13.42
Milwaukee, WI 16.44 16.37
Minneapolis/St. Paul, MN 18.71 19.88
Nashville, TN 10.22 11.55
New Jersey - Central 15.50 15.29
New Jersey - Northern 11.32 11.17
New York - Fairfield County, CT 16.44 17.62
New York - Westchester County, NY 15.99 16.95
Oakland, CA 16.47 16.86
Orange County, CA 18.20 19.45
Orlando, FL 13.62 14.37
Philadelphia, PA 15.43 15.14
Phoenix, AZ 20.04 20.99
Pleasanton/Walnut Creek, CA 14.04 14.41
Portland, OR 10.33 11.00
Raleigh/Durham/Chapel Hill, NC 16.99 18.97
Reno, NV 18.56 21.12
Sacramento, CA 15.76 16.87
San Diego County, CA 17.38 18.16
San Francisco Peninsula, CA 16.12 18.42
San Jose/Silicon Valley, CA 13.62 16.77
Santa Rosa/Sonoma County, CA 27.52 29.00
Seattle/Puget Sound, WA 10.31 10.41
St. Louis, MO 9.15 9.36
Tampa, FL 13.33 14.10
Washington, DC - N. Virginia 9.41 10.00
Washington, DC - Suburban, MD 11.02 11.49
West Palm Beach/Palm Beach County, FL 18.88 20.99
National Average 14.69 15.67
About Colliers International
Colliers International is a global affiliation of independently owned commercial real estate firms. The organization's 11,000 employees span the world in 293 offices in 61 countries. On a worldwide basis, Colliers manages more than 886 million square feet and has revenue of $US 2.0 billion.
Contact Information
Ross Moore
Executive Vice President | Market & Economic Research
Colliers International
50 Milk Street, 20th Floor
Boston, MA 02109
 back to top
|