U.S. Office Market Flat-Lines in Q1'09, According to Colliers International

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
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. For
more information, visit http://www.colliers.com.

SOURCE Colliers International

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