New Construction Down but Office, Industrial Vacancy Still Expected to Rise

SANTA ANA, CA, Jan.27, 2009--Bob Bach, (top right photo) senior vice president and chief economist, Grubb & Ellis Co., says in his regular report today, "the disciplined addition of new space over the past several years should help the commercial real estate industry deal with the recession.

"As a percentage of the existing inventory, neither the office nor industrial construction pipelines reached their previous peaks leading up to the recessions in 2001 and 1990-91.

"Nevertheless, new space deliveries in 2009 and 2010 will cause leasing market fundamentals to soften even before negative absorption is factored into the equation.

The 80 million square feet of office space under construction will push the office vacancy rate from 14.8 percent at year-end 2008 to 16.5 percent.

For industrial space, the 72 million square feet under way will push the industrial vacancy rate from 8.8 percent at year-end 2008 to 9.3 percent.

Tenant downsizings are expected to generate significant negative absorption, which will raise vacancy rates above these levels before a market recovery can begin.

For more information or to speak with Bob Bach, please contact Janice McDill at 312.698.6707.