U.S. Office Market Falters in Q1, as Sluggish Leasing Activity and Rising Vacancies...

U.S. Office Market Falters in Q1, as Sluggish Leasing Activity and Rising
Vacancies Create Uncertainty for the Rest of 2008, According to Colliers
International

BOSTON, April 17 /PRNewswire/ -- The United States office market kicked
off 2008 on a lackluster note, with the Q1 vacancy rate increasing by 35 basis
points to clock in at 12.77 percent, according to a report by Colliers
International, a leading global real estate services firm.
This marks the second consecutive quarter of increased vacancies on a
national level, Colliers said. While CBD vacancies generally held steady,
suburban vacancies leapt 54 basis points in Q1, to 13.80 percent. Indeed,
while 22 of the CBDs surveyed recorded a decrease in vacancy in the January
through March period, 29 recorded a spike. As for the suburbs, 39 markets saw
an increase in office vacancy while 14 witnessed a decline. Nationally, Class
A vacancy rates increased from 11.28 percent to 11.76 percent, while B and C
class vacancy rates jumped 25 basis points to 13.64 percent.
Absorption, or the change in occupied space, swung to the negative during
the first quarter, measuring negative 3.0 million square feet (msf) -- a
significant drop-off from the previous quarter's absorption of 9.8 msf.
Further, Q1 absorption measured well below that of the year-ago period, when
occupied space increased by 12.5 msf. Alongside this negative first quarter
absorption, another 17.8 msf was added to the office market, with an
additional 119.4 msf under construction. While construction activity was
expected to fall, office developments in the pipeline actually increased by
10.6 msf.
As for rents, downtown Class A rents increased 3.6 percent over the
previous quarter, while the suburbs registered no change. From the year-ago
quarter, downtown rents have increased 16.5 percent and suburban rents have
increased 9.2 percent. Class A downtown rents have cracked the $50 barrier,
now averaging $50.41 per square foot (psf) and 31.62 psf (unweighted). For
suburban office space, the national average rent now comes in at $28.84 and
$26.83 (unweighted).
"Despite the abundance of bad news experienced by the financial markets in
the first quarter, the office real estate market now finds itself engaged in a
battle of expectations," remarked Ross Moore, senior vice president and
director of market and economic research at Colliers International. "Tenants
see a faltering economy and as a result expect lower rents, while landlords
feel confident with occupancy rates still near historic highs, giving them the
leverage to push rents higher.
"While we had marked down our Q1 projections, this quarter's office
absorption numbers were considerably below the latest revisions. This
suggests the first half of 2008 will be relatively quiet for the lion's share
of U.S. cities," concluded Moore.

Downtown -- All Inventory
VACANCY RATE VACANCY RATE
MARKET DEC 31, 2007 (%) MARCH 31, 2008 (%)
Kansas City, MO-KS 20.5 21.3
Dallas/Ft. Worth, TX 21.4 21.0
St. Louis, MO 19.7 19.6
Cleveland, OH 19.0 18.6
Reno, NV 19.6 18.4
Baltimore, MD 17.1 17.0
Detroit, MI 26.8 17.0
Minneapolis/St. Paul, MN 16.3 16.5
Stockton/San Joaquin County, CA 16.5 16.4
Memphis, TN 16.9 16.1
Ft. Lauderdale/Broward County, FL 15.7 16.0
Cincinnati, OH 15.4 15.9
Santa Rosa, CA 17.0 15.8
Hartford, CT 15.4 15.1
Tampa, FL 13.5 15.1
Milwaukee, WI 14.6 14.9
Columbia, SC 13.6 14.7
Los Angeles, CA 14.3 14.7
Indianapolis, IN 15.3 14.4
West Palm Beach/Palm Beach County, FL 12.7 14.0
Oakland, CA 14.2 14.0
San Diego County, CA 14.9 13.9
Phoenix, AZ 13.1 13.8
San Jose/Silicon Valley, CA 13.0 13.8
Sacramento, CA 13.1 13.6
Chicago, IL 13.3 13.5
Greenville, SC 12.5 12.3
Columbus, OH 12.5 12.0
Nashville, TN 11.3 12.0
Miami/Dade County, FL 11.4 11.8
Little Rock 10.9 11.8
Atlanta, GA 11.2 11.4
Houston, TX 12.1 11.3
Jacksonville, FL 11.1 11.0
US AVERAGE 10.8 10.8
Fresno, CA 9.5 10.7
Denver, CO 12.4 10.5
New York, NY -- Midtown South Manhattan 9.3 10.2
San Francisco, CA 9.9 10.2
Philadelphia, PA 10.6 9.6
Boise, ID 9.3 9.3
Seattle, WA 8.7 8.9
Boston, MA 8.9 8.7
Honolulu, HI 8.0 8.6
Portland, OR 8.3 8.2
Orlando, FL 6.2 7.6
New York, NY -- Midtown Manhattan 6.8 7.1
New York, NY -- Downtown Manhattan 6.8 7.0
Las Vegas, NV 5.9 6.0
Bakersfield, CA 4.1 5.7
Washington, DC 5.3 5.4
Raleigh/Durham/Chapel Hill, NC 6.9 5.3
Charlotte, NC 2.6 2.0

Suburbs -- All Inventory
VACANCY RATE VACANCY RATE
MARKET DEC 31, 2007 (%) MARCH 31, 2008 (%)
Santa Rosa, CA 25.8 26.4
Cincinnati, OH 21.6 19.9
Chicago, IL 19.0 19.6
Indianapolis, IN 18.6 19.4
Hartford, CT 16.9 18.9
Detroit, MI 17.6 18.3
Orange County, CA 15.3 17.3
Minneapolis/St. Paul, MN 16.2 17.0
Reno, NV 14.4 16.9
West Palm Beach/Palm Beach County, FL 15.1 16.9
Phoenix, AZ 14.1 16.7
Columbus, OH 17.2 16.6
Dallas/Ft. Worth, TX 16.3 16.6
Boston, MA 16.6 16.4
New York -- Westchester County, NY 15.9 16.3
Raleigh/Durham/Chapel Hill, NC 15.7 15.9
New Jersey -- Central 14.4 15.8
Oakland, CA 16.3 15.6
Boise, ID 15.4 15.1
Baltimore, MD 14.5 15.0
San Diego County, CA 13.8 14.9
Las Vegas, NV 13.6 14.8
Columbia, SC 15.0 14.8
Kansas City, MO-KS 14.3 14.5
New York -- Fairfield County, CT 15.0 14.4
Sacramento, CA 13.8 14.3
US AVERAGE 13.2 13.8
Philadelphia, PA 13.7 13.6
Memphis, TN 12.3 12.9
Charlotte, NC 12.4 12.7
Denver, CO 12.3 12.6
Houston, TX 11.9 12.5
Little Rock 9.9 12.4
Fresno, CA 11.9 12.4
Jacksonville, FL 11.8 12.3
Atlanta, GA 11.9 12.2
Greenville, SC 12.5 12.0
SF Peninsula/San Mateo County, CA 11.3 11.8
Portland, OR 11.3 11.7
New Jersey -- Northern 11.2 11.7
Milwaukee, WI 11.5 11.5
Ft. Lauderdale/Broward County, FL 11.1 11.4
Cleveland, OH 11.5 11.3
Tampa, FL 10.7 11.3
Washington, DC -- N. Virginia 11.3 11.1
Los Angeles, CA 10.4 10.8
San Jose/Silicon Valley, CA 8.1 10.8
Seattle, WA 11.1 10.7
Washington, DC -- Suburban, MD 9.3 10.4
Miami/Dade County, FL 9.0 9.7
Nashville, TN 9.9 9.5
Orlando, FL 8.4 9.5
St. Louis, MO 9.7 8.7
Bakersfield, CA 5.1 7.0
Honolulu, HI 6.5 6.8

About Colliers
Colliers International is a global affiliation of independently owned
commercial real estate firms. The organization's 10,092 employees span the
world in 267 offices in 57 countries. On a worldwide basis, Colliers manages
672,945,918 square feet, and has revenue of $US 1,620,958,439. For more
information, visit www.colliers.com.
SOURCE Colliers International

Kristin Sadlon, of Porter Novelli for Colliers International, +1-212-601-8192,
Kristin.sadlon@porternovelli.com