Tuesday, April 30, 2013

The Tortoise, Not the Hare: U.S. Office Market Continues Slow but Steady Improvement


  
Michael Bull

 ATLANTA, GA– Its recovery may not be proceeding at a lightning-quick pace, but the U.S. office real estate market continued to show signs of noticeable improvement in the first quarter.

 That was one of the observations of a panel of experts on the most recent episode of the “Commercial Real Estate Show” radio program, hosted by Michael Bull of Bull Realty. The episode provided an enlightening look at the performance of the U.S. office sector in the first quarter.

Topics included vacancy rates, investment sales, the healthiest markets and tenant concessions.

Ryan Severino
 The national vacancy rate for the office sector fell 10 basis points in the first quarter, to 17.0 percent, from its mark at the end of 2012, said Ryan Severino, senior economist for Reis. Both asking and effective rents grew by about .7 percent in the first three months of the year, he added.

 “We’re more the tortoise than the hare here,” Severino said. “We’re kind of slow but steady.”

 The rest of 2013 will produce much of the same, Severino predicted. “I do expect to see continued improvement in the sector, but I don’t really expect to see any acceleration in that rate of improvement.”

Glen Marker
 Although the nation is producing new jobs each month, too few are office-using positions, and that dynamic is preventing the sector’s recovery from attaining a brisker pace, according to Severino.

 Over the next few years, metro areas characterized by “a high concentration of well-educated people and a fairly low cost of doing business should” produce a healthy pace of new jobs, said Glen Marker, a senior market advisor with PPR, a division of CoStar. He cited Nashville, Tenn., and Denver as two such markets.

 Tenants want smaller offices these days, and they often want the spaces they’re considering to be move-in ready, said Andrew Segal, the founder of Boxer Property, which owns office space across the country.

Andrew Segal
 “We’re definitely seeing more open [floorplans],” Segal said. “There’s also a trend of adopting some of the looks from California. People are less interested in ceiling tiles and carpet and more interested in exposed ductwork and concrete floors.”

 As for investment opportunities, the amount of distressed properties available for relatively low prices is beginning to decline, said David Wheeler, executive vice president of acquisitions for Hartman Income REIT.

David Wheeler
 “We did see a fair amount of distressed sales over the last two to three years, but that is dwindling, slowly but surely,” Wheeler said. “We do expect that to continue to play out with the level of CMBS loans coming up for expiration over the next couple of years … It’s going to dwindle, but it will still be in the market for another couple of years.”

 The entire episode on the U.S. office market is available for download at www.CREshow.com. The next “Commercial Real Estate Show” will be available May 2 and will examine the U.S. retail market.

 For a complete copy of the company’s news release, please contact:

Stephen Ursery
The Wilbert Group
Office: (404) 965-5026
Cell: (404) 405-2354

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