Monday, October 22, 2012

Office Market Shows Slight Improvement in Third Quarter


  
Michael Bull
 ATLANTA, GA (Oct. 22, 2012) – The third quarter marked another period of tepid improvement for the U.S. office real estate market, and the sector doesn’t appear ready to take off in the near future.

 The new episode of “America’s Commercial Real Estate Show” offered an enlightening look at the office sector’s recent performance. Show host Michael Bull and his panel of expert guests discussed a range of topics, including vacancy rates, investment sales, design trends and tenant concessions.

Ryan Severino
The national office vacancy rate declined ever so slightly in the third quarter, from 17.2 percent in the second quarter to 17.1 percent, said Ryan Severino, a senior economist with Reis. The third-quarter rate represents a 30-basis-point drop from the same period in 2011.

 National asking and effective rents both increased by 0.2 percent from the preceding quarter, and absorption rose from a positive 4.5million square feet in the second quarter to about 5 million square feet.

Sean Williams
 “With the labor market struggling, demand for office space unfortunately remains at very low levels,” Severino said. Still, even though the office market’s third-quarter performance was “not a spectacular result by any stretch of the imagination, at least we’re still trending in the right direction,” he added.

Office investment sales also appear to be slowing down, according to Severino. “It just seems like there’s a little bit of fatigue on the part of investors,” he said. “They’ve been investing in high-quality, trophy-caliber assets for the last few years, which is what has really beenbehind the downward trend in cap rates. But that’s only sustainable for so long without strong economic growth and improvement in the labor market.”

Steve Martin
Asked about the near future, Severino predicted “slow improvement” in rents and vacancy rates through the end of 2013.

Sean Williams, a vice president in Bull Realty’s Corporate Office Services Group, predicted that more distressed office properties would be available for purchase in the coming months and years. One reason, he said, “is the CMBS loan sector, which saw $6.4 billion in loans coming due in 2012 … In 2015, it’s expected to hit $11 billion.”

 Steven Martin, a managing principal with SDM Partners, said the gradual improvements mean the office market will soon no longer be one that completely favors tenants. “It’s still a tenants’ market, but that window is closing, and it will continue to close,” he said.

Bill Coons
Bill Coons, president of Facilitec, a workplace design firm, said tenants are leasing fewer square feet per employee and are designing more open, collaborative environments but cautioned against believing these changes are here to stay. “We’re in the early stages of some of these trends, and I think it remains to be seen how it plays out,” he said.

 The entire “U.S. Office Market Update” episode is available for download at www.CREshow.com.

 The next “America’s Commercial Real Estate Show” will be available on Oct. 25 and will detail the new “Emerging Trends in Real Estate 2013” report from the Urban Land Institute and PricewaterhouseCoopers.

 Contact:

Stephen Ursery
Wilbert Public Relations
Office: (404) 965-5026
Cell: (404) 405-2354







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