Posted in commercial real estate, downsizing, Green Building, headquarters, lease, new office, office space, oregon, square feet, start up, sublease, Vacancies, tagged commercial real estate, job loss, lease, office space, renewal, square feet, square foot, sublease, tenants, vacancy rate on March 31, 2009 |
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The loss of more than 4 million jobs over the last 15 months has pushed the national office vacancy rate in 2008 to 14.5% , up from 12.6% in 2007 (based on 79 office markets tracked by the Bureau of Labor Statistics). Office rents grew from 9% to 10.6% between 2006 and 2007, but started a moderate decline in the second half of 2008. They are on a much sharper downward trajectory for the first quarter of 2009.
As a result of the change in market conditions, tenants are now pressuring landlords to renegotiate leases or downsize their space. This type of strategy is effective in the most overheated markets (ie. New York, Los Angeles, Las Vegas, Miami, etc) while secondary markets are less exposed and therefore slower to lower rates and/or “right-size” tenants in order to keep them on the rent roll. In the Portland/Vancouver area, think suburbs for the greatest opportunities in savings at this stage of the cycle.
Office tenants are also delaying lease decisions if at all possible. With so much uncertainty in the economy most businesses appear to be in a holding pattern until a clear picture of future revenues is visible. I would hazard to guess that tenants are also counting on a further decline in rental rates. However, at the end of the day, most are renewing their leases, usually for three to five years, with some are taking the one to two year tactic in case things just don’t work out.
data source: Reis and National Real Estate Investor
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