Leasing Sentiment Up, but U.S. Office Fundamentals Remain Weak in Q3,
According to Colliers International
Vacancies up (less); rents down (less); net absorption (less)
negative....'Less Bad is the new Good'
BOSTON, Oct. 26 /PRNewswire/ -- Despite more vigorous leasing activity,
consistent with a stabilizing economy, United States office vacancies rose
another half point during the third quarter of 2009, coming in at 16.0
percent, according to the Q3 office report from Colliers International, a
leading global real estate services firm. As with the previous quarter,
national office vacancies kept rising in both downtown and suburban markets.
The downtown vacancy rate increased 37 basis points and the suburban vacancy
rate jumped 66 basis points.
Absorption presented a relative bright-spot during the July through September
period. While occupied space shrank during Q3, registering negative 17.7
million square feet (msf), this decrease was less than the negative 25 msf
posted in the first and second quarters of this year. Thus, "less bad is the
new good."
Class A office buildings in downtown markets fared best in Q3, with 25 of the
56 CBD markets surveyed by Colliers showing positive quarterly net absorption.
Suburban markets were more lackluster, reflected by 18 of 55 suburban markets
under study by Colliers with vacancy rates in excess of 20 percent.
Rental rates for office space continued their decline across all space classes
in both suburban and downtown markets. Suburban Class A rents were down 1.6
percent during Q3 and 5.4 percent year-over-year (weighted average). Downtown
Class A rents were down 2.7 percent in Q3 and 18.8 percent year-over-year
(weighted average). The weighted average downtown Class A rent stood at
$40.09 per square foot (psf) and the suburban Class A rent posted $26.95 psf
at the close of the third quarter.
As for new construction, total new Q3 supply was 16.8 msf, with 4.4 msf
newly-completed in downtown markets and 12.4 msf newly-completed in the
suburbs. This total amount of new office completions was 500,000 square feet
more than the amount delivered in Q2, and 1.4 msf more than the first
quarter's new supply. An additional 51.0 msf is currently under construction,
with 29.7 msf pending for downtown markets and 21.3 msf for the suburbs.
Construction activity has tapered off, such that it is very quickly
approaching barely-discernable levels.
"Even though the overarching picture still looks bleak, we perceive glimmers
of hope on the horizon," remarked Ross Moore, executive vice president and
director of market & economic research for Colliers International. "Leasing
activity was up in nearly every market we surveyed, and we're seeing a
resurgence of confidence on a few fronts. A select group of tenants can now
access the capital markets, and confidence in their own ongoing health has
unleashed some pent-up demand for office space. We see tenants increasingly
willing to go long on their leases, and the oft-predicted bearish scenario of
skyrocketing sublease space never played out. While we're nowhere near out of
the woods, we feel confident that the office market has turned a corner and
will be poised for improvement in the second half of 2010."
Office Vacancy Rates, market-by-market
DOWNTOWN
VACANCY VACANCY
RATE SEP 30, RATE SEP 30,
MARKET 2008 (%) 2009 (%)
Atlanta, GA 12.6 13.6
Bakersfield, CA 6.5 7.8
Baltimore, MD 17.4 21.4
Boise, ID 9.2 12.1
Boston, MA 9.3 13.0
Charleston, SC 6.5 9.2
Charlotte, NC 2.4 6.3
Chicago, IL 12.6 15.8
Cincinnati, OH 16.8 18.6
Cleveland, OH 16.5 16.0
Columbia SC 12.5 24.5
Columbus, OH 11.3 14.8
Dallas/Fort Worth, TX 20.5 21.5
Denver, CO 17.3 15.3
Detroit, MI 16.4 15.6
Fresno, CA 11.2 9.1
Ft. Lauderdale-Broward, FL 12.7 11.2
Greenville, SC 17.3 24.1
Hartford, CT 15.0 18.8
Honolulu, HI 9.8 11.8
Houston, TX 11.8 13.1
Indianapolis, IN 14.1 15.5
Jacksonville, FL 10.6 12.7
Kansas City MO-KS 21.6 22.5
Las Vegas, NV 8.5 12.1
Little Rock, AR 12.7 13.2
Los Angeles, CA 15.0 15.1
Louisville, KY 7.1 10.4
Memphis, TN 11.6 14.3
Miami/Dade County, FL 14.4 16.0
Milwaukee, WI 15.9 19.5
Minneapolis/St. Paul, MN 15.3 18.1
Nashville, TN 15.5 19.2
New York, NY - Downtown Manhattan 8.8 10.8
New York, NY - Midtown Manhattan 8.7 13.8
New York, NY - Midtown So. Manhattan 10.3 14.2
Oakland, CA 19.9 11.6
Orlando, FL 13.1 16.8
Philadelphia, PA 9.8 11.5
Phoenix, AZ 13.2 16.6
Pleasanton/Walnut Creek, CA 14.9 21.0
Portland, OR 6.8 8.5
Raleigh/Durham/Chapel Hill, NC 10.0 7.9
Reno, NV 19.8 22.4
Sacramento, CA 9.8 8.3
San Diego County, CA 14.7 14.5
San Francisco, CA 10.5 14.4
San Jose/Silicon Valley, CA 20.0 24.4
Seattle/Puget Sound, WA 9.2 12.2
St. Louis, MO 20.7 22.8
Stockton/San Joaquin County, CA 18.7 18.7
Tampa, FL 14.9 15.3
Washington, DC 7.8 10.3
West Palm Beach/Palm Beach Co., FL 18.2 18.5
U.S. TOTAL/AVERAGE 11.4 14.2
SUBURBAN
VACANCY VACANCY
RATE SEP 30, RATE SEP 30,
MARKET 2008 (%) 2009 (%)
Atlanta, GA 15.3 17.4
Bakersfield, CA 8.2 10.9
Baltimore, MD 16.8 18.7
Boise, ID 15.2 19.7
Boston, MA 16.4 19.5
Charleston, SC 20.0 21.0
Charlotte, NC 13.6 15.4
Chicago, IL 20.0 23.3
Cincinnati, OH 21.4 23.2
Cleveland, OH 10.4 10.2
Columbia SC 17.8 21.5
Columbus, OH 16.0 17.1
Dallas/Fort Worth, TX 16.2 16.9
Denver, CO 14.9 15.1
Detroit, MI 18.2 18.6
Fairfield, CA 23.7 25.9
Fresno, CA 13.2 14.5
Ft. Lauderdale-Broward, FL 12.9 14.8
Greenville, SC 17.2 22.5
Hartford, CT 18.4 18.4
Honolulu, HI 6.7 9.8
Houston, TX 12.6 16.9
Indianapolis, IN 19.9 22.7
Jacksonville, FL 14.3 17.1
Kansas City MO-KS 15.0 17.8
Las Vegas, NV 20.6 24.7
Little Rock, AR 11.8 8.0
Los Angeles - Inland Empire, CA 18.4 23.7
Los Angeles, CA 11.8 15.9
Louisville, KY 18.1 18.5
Memphis, TN 13.4 12.9
Miami/Dade County, FL 11.4 15.6
Milwaukee, WI 15.0 18.1
Minneapolis/St. Paul, MN 17.9 20.6
Nashville, TN 10.0 12.6
New Jersey - Central 15.7 18.4
New Jersey - Northern 11.7 14.2
New York - Fairfield County, CT 15.1 20.1
New York - Westchester County, NY 16.9 16.4
Oakland, CA 16.4 18.2
Orange County, CA 18.7 20.6
Orlando, FL 12.5 16.7
Philadelphia, PA 14.3 16.1
Phoenix, AZ 18.3 22.9
Pleasanton/Walnut Creek, CA 13.0 14.4
Portland, OR 11.6 15.2
Raleigh/Durham/Chapel Hill, NC 16.6 21.1
Reno, NV 19.5 20.8
Sacramento, CA 14.6 16.3
San Diego County, CA 15.4 18.0
San Francisco Peninsula, CA 14.0 20.2
San Jose/Silicon Valley, CA 12.7 20.7
Seattle/Puget Sound, WA 12.5 12.1
St. Louis, MO 8.7 9.8
Tampa, FL 12.9 15.2
Washington, DC - N. Virginia 12.0 10.9
Washington, DC - Suburban, MD 11.0 12.2
West Palm Beach/Palm Beach Co., FL 17.8 21.4
U.S. TOTAL/AVERAGE 14.7 16.9
About Colliers
Colliers International is a global affiliation of independently owned
commercial real estate firms. The organization's 12,700 employees span the
world in 294 offices in 61 countries. On a worldwide basis, Colliers manages
more than 1.1 billion square feet and has revenue of $US 1.6 billion. For
more information, visit http://www.colliers.com.
SOURCE Colliers International
Kristin Sadlon of Porter Novelli, +1-212-601-8192, or
Kristin.sadlon@porternovelli.com, for Colliers International
