Magazine article Mortgage Banking

U.S. Office Market Falters during First Quarter

Magazine article Mortgage Banking

U.S. Office Market Falters during First Quarter

Article excerpt

The U.S. office market faltered during the first quarter of 2008, as sluggish leasing activity and rising vacancies are poised to create uncertainty for the remainder of 2008, according to Boston-based Colliers International Property Consultants Inc.

The first-quarter office vacancy rate increased by 35 basis points to a total of 12.77 percent, marking the second consecutive quarter of increased vacancies on a national level, Colliers noted.

Central business district (CBD) office vacancies generally held steady, but suburban vacancies leapt 54 basis points during the first quarter to 13.8 percent. Furthermore, 22 of the CBDs surveyed recorded a decrease in vacancy in the January-through-March period, while 29 recorded a spike.

In the suburbs, 39 markets saw an increase in office vacancy while 14 witnessed a decline. Nationally, class-A vacancy rates increased from 11.28 percent to 11.76 percent, while class-B and class-C vacancy rates jumped 25 basis points to 13.64 percent, said Colliers.

"Despite the abundance of bad news experienced by the financial markets in the first quarter, the office real estate market now finds itself engaged in a battle of expectations," explained Ross Moore, senior vice president and director of market and economic research at Colliers International.

"Tenants see a faltering economy and as a result expect lower rents, while landlords feel confident with occupancy rates still near historic highs, giving them the leverage to push rents higher," Moore said. …

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