Daily Real Estate News  |  October 3, 2008  |   Office Vacancies Rise as Economy Slows
Vacancy rates for U.S. office space rose to its highest level in two years during the third quarter as the shrinking financial industry and weakening economy let leases expire.

"This trend will continue in the coming quarters as large financial services firms, among others, rationalize payrolls and consolidate employees as part of the current wave of mergers and acquisitions," said Sam Chandan, Reis Inc. research firm chief economist, in a statement.

U.S. office vacancy rose to 13.6 percent, up 0.5 percentage points from the second quarter, its largest one-quarter jump since the second quarter of 2002. The third-quarter vacancy rate was the highest since the second quarter of 2006 and was 110 percentage points higher than its recent low of 12.5 percent set in the third quarter of 2007.

Asking rent growth grew 0.6 percent in the third quarter, its slowest since the second quarter of 2005. To attract tenants, landlords were forced to offer more concessions, such as free months rent. That eliminated effective rent growth, translating to an average rent of $25.16 per square foot in the third quarter of 2008. Growth failed to keep pace with inflation.

Source: Reuters News, Ilaina Jonas (10/03/08)