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| 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.
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| 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.
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| 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
E-mail: sursery@wnspr.com
Office: (404) 965-5026
Cell: (404) 405-2354
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