Real Estate Journal Online

While there is certainly no danger of an office space “bubble” at this time, 2011 is showing marked, though slow, improvement in office space vacancies around the country[1]. This is good news for commercial real estate owners and small businesses because it indicates that once again businesses are beginning to expand. According to property research firm Reis Inc., average effective rents – including free rent, interior work and other incentives – rose by 0.5 percent in the first quarter of 2011, marking “the second consecutive quarter of rent increases” and indicating that “the industry has finally turned the corner,” say experts.

Not surprisingly, the increase in rents in Washington D.C. and New York City were much higher and vacancy rates much lower. D.C. boasts a 9.2 percent vacancy rate while NYC logged in at 10.7 percent. On the other hand, Detroit and Phoenix, both “hardest hit” cities in nearly every real estate sector, showed 26.6 percent vacancy and continue to deal with fallout from high unemployment, population decline and the housing crisis. Nationally, the vacancy rate averages 17.5 percent, a slight decrease from the previous quarter[2]. Ryan Severino, a Reis economist, believes that “this is the first quarter…on a national basis where the change is strong enough to qualify it as the first quarter of a recovery….The good is starting to outweigh the bad,” he said. Arthur Jones, senior economist at CBRE, however, believes that there are still too many risks to declare the office sector in a full recovery. “We need to see another quarter’s worth of data,” he said, though he predicted that San Francisco, Pittsburgh, Dallas and Austin, Texas would likely see rent gains next year as the recovery sweeps from east to west across the country.

Thank you for reading REJournalOnline!

Let us know if you think the commercial sector – office space in particular – is truly recovering by leaving comments in the space below.

[1]http://online.wsj.com/article/SB10001424052748704587004576243200953666290.html
[2]http://www.bloomberg.com/news/2011-04-05/office-recovery-begins-in-u-s-as-vacancies-drop-for-first-time-since-2007.html