U.S. office landlords had the first
net increase in occupied space in three years in the fourth
quarter, a sign the market is beginning to recover, said Reis
Inc., a New York-based property-research firm.
Office buildings added 2.5 million square feet (232,000
square meters) of occupied space in the fourth quarter, compared
with a loss of 14 million square feet a year earlier, Reis said
in its report. It was the first rise in net absorption since the
fourth quarter of ᎈ7.
The office vacancy rate was unchanged from the third
quarter at 17.6 percent, remaining at the highest level since
1993, as supply also increased. The last time vacancies didn’t
rise quarter to quarter was in the third quarter of 2007,
according to Reis. Vacancies stood at 17 percent a year earlier.
“Vacancy has finally appeared to have stabilized,” Ryan
Severino, an economist at Reis, said in the firm’s quarterly
survey of the office market. While the leasing environment
remains “difficult,” vacancies are more likely to fall than
rise in coming quarters, he said.
The market has benefited from a pickup in the economy, Reis
said. Sales at retailers rose more than expected in November
while manufacturing expanded in December at the fastest pace in
seven months. Growth has been hindered as companies remain
reluctant to boost hiring 18 months after the end of the
recession. The unemployment rate rose to a seven-month high of
9.8 percent in November as payroll growth slowed to 39,000 from
172,000 in the prior month, according to the Labor Department.
Effective rents, or what tenants actually pay, fell to an
average $22.09 per square foot from $22.43 a year earlier, Reis
said. They were up from $22.04 in the third quarter, the first
quarter-to-quarter increase in effective rents since 2008’s
second quarter.
Asking Rents
Landlords’ asking rents dropped to $27.53 a foot from
$27.79 a year earlier and were up from $27.50 in the third
quarter, according to Reis. It was the first quarterly increase
in asking rents since the third quarter of 2008.
“The increase in asking rents is a positive development
and demonstrates that landlords finally feel confident enough
about their prospects to move beyond simply adjusting
concessions,€ Severino said.
A total of 2.3 million square feet of new office space came
to market in the fourth quarter, the lowest since Reis began
publishing quarterly data in 1999.
New York
“These are only the nascent stages of a recovery in the
office market,” Severino said. Improvement in the office market
will reflect what happens in the economy and labor market, where
growth remains “inconsistent,” he said.
New York office vacancies declined to 11.4 percent from
11.6 percent in the third quarter and effective rents rose 1.5
percent from the prior quarter, Reis said. Washington maintained
the lowest vacancy rate at 9.9 percent, while Detroit had the
highest vacancy at 26.9 percent.
The number of markets that registered quarterly effective
rent declines fell to 40 out of 79 in the quarter from 46 out of
79 in the third quarter, Reis said.
To contact the reporter on this story:
Hui-yong Yu in Seattle at
hyu@bloomberg.net
To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net