The Trends: Demand Hurts

The U.S. office vacancy rate hit 14.1 percent in the third quarter, an upsurge of 50 basis points from the previous quarter, according to November Americas MarketView, a report by CB Richard Ellis Inc. director of research operations for the Americas Raymond Wong. That figure translates into almost 4 million square feet of negative absorption. Detroit, Dallas-Fort Worth and Phoenix each struggled, registering vacancy rates that surpassed 19 percent. On the other end of the spectrum, Manhattan, Honolulu and Miami featured the lowest vacancy rates, each less than 10 percent.“It is expected that most real estate occupancy decisions that can be deferred will be,” the report stated. “On the other side, with the increase in vacancy rates, there will be opportunities to lock up space at advantageous rents. … Gaps between owner and tenant rent expectations have begun to diminish, as landlords focus on property occupancy rates as opposed to holding fast on asking rents.”Colliers International’s national office vacancy data came in slightly lower, at 13.7 percent. Still, the figure marks the sector’s fourth straight quarterly gain in vacancy. Vacancy rates in central business districts averaged 11.4 percent, predictably stronger than the suburban counterparts’ 14.8 percent. Net absorption was reported at negative 2.2 million square feet.“The commercial real estate market has been here before,” according to commentary by Colliers International executive vice president of market and economic research Russ Moore. “This is a cyclical business, and the current downturn will be followed by an eventual upturn. Commercial real estate is a lagging indicator, and as equities begin their bounce back, so will go the economy and eventually the commercial real estate sector.”