Office Space News
Office space market is burdened nationwide
Published November 25th, 2008 by Mike Sullivan
It’s not surprising that the office space outlook is grim given the current economic conditions. There are reports of areas, like Detroit, where vacancies have increased by 300 basis points (3 percentage points) year over year. Looking at the office space sector of the commercial real estate market nationwide, the the market has lost 60 basis points of occupancy from the second to the third quarter of 2008. There are a few bright spots, with 10 cities whose rents have continued to rise. However, last year during the third quarter, 45 cities saw rising rents.
The strongest cities in terms of vacancy are: New York (6.2%), Washington DC (8.1%), San Francisco (9.9%), Seattle (10%) and Nashville (10%). The strongest commercial real estate submarket in the country remains Charlotte’s central business district, with less than a 2% vacancy rate. However, even this powerhouse is concerned, most recently because of a merger between Wells Fargo and Wachovia, which will likely mean that 300,000 to 600,000 square feet could go back on the market.
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Rob Zeus November 26th, 2008 at 6:54 am
It’s not surprising that office vacancies would be up in Detroit — and that number could escalate if the Big Three Automakers don’t get a bailout or otherwise reorganize through bankruptcy. Still, some cities are faring worse than Detroit in the office market. It seems office space is yet another victim of the downturn, exacerbated by near-record job losses. I am not too sure companies, when they do recover, are going to head straight back to a long-term office rental. Watch for the serviced office industry to hold its own better during this downturn and find new opportunities at the onset of recovery.
Commercial office space market's hidden losses | aBetterOffice November 26th, 2008 at 12:08 pm
[...] covering information about drops in occupancy over the past few weeks. I reported yesterday that commercial office space has dropped in occupancy nationwide about 60 basis points from second to third quarter of 2008. [...]
Maggie Correta November 28th, 2008 at 11:07 am
It’s interesting that Charlotte, of all places, would have the strongest office market. Then again, maybe it’s not. Few people realize that Charlotte is a heavy hitter in the financial services sector. Banks have opened corporate offices there to serve as a main hub to the south. Charlotte was riding high on this reputation, so its heavy reliance on this sector could be problematic in the wake of banking consolidation. I’ll wait to see those office lease numbers look like a year from now. The good news for Charlotte is the city will have high quality office space available. Could it be converted to executive office suites if it empties in the downturn? I think so.
Melanie Jones December 3rd, 2008 at 9:30 am
The Washington, D.C. office rental statistic surprised me. I wonder what’s driving that? Government jobs have swelled and so have ancillary services that cater to them. The rising office rents, on the other hand, don’t surprise me. Vacancy was fairly low in 2008, despite the fact that some report we’ve been in recession since Dec. 2007. I expect it to be a tenant’s market in 2009 and maybe into 2010.
Rob Zeus December 4th, 2008 at 8:48 am
The strongest cities in terms of office vacancy are New York, Washington D.C., San Francisco, Seattle and Nashville. I wonder how long that will last. I imagine next quarter, we are going to see some heavy bleeding in the office rental reports. Does anyone track serviced office space as subsector? I haven’t seen any specific reports, but this would be very telling.
Mike Sullivan December 4th, 2008 at 9:18 am
Unfortunately, the serviced office industry has no analysts or groups who publish data on vacancy. Since Regus is a global public company they publish occupancy in their statements and annual reports. Often you can look at their data for insight into the direction of the market. I would argue that due to their global nature, extensive experience and capitalization they do not accurately represent the market as a whole. Also, they are only about 10% (or less) of the total share of serviced office space. One may be able to argue that they are a lagging indicator of a downturn and a leading indicator of an upswing.
New Executive Suites Planned for Charlotte | aBetterOffice December 17th, 2008 at 9:36 am
[...] Charlotte is a thriving city and a growing hotbed for service firms that need to rent office space. Office vacancy rates in Charlotte are lower than in midtown [...]