Magazine article Mortgage Banking

Reis: Office Sector Pauses, but Don't Panic

Magazine article Mortgage Banking

Reis: Office Sector Pauses, but Don't Panic

Article excerpt

Though the national office vacancy S rate held steady at 16.8 percent for the third consecutive quarter, do not panic, said Reis Inc., New York.

"Although this is superficially alarming, a few qualifications are necessary and important," said Reis Senior Economist Ryan Severino. "First, net absorption technically outpaced new construction once again. However, much like last quarter, the difference was not sufficient enough to push the vacancy rate downward." Severino noted that demand did not evaporate; it simply failed to produce a declining vacancy rate in recent quarters.

"Second, as we have observed in the recent past, construction and net absorption remain linked to each other due to the ongoing preleasing requirement in place for new construction financing," Severino added. That tends to keep supply and demand roughly in balance during weak recoveries like this one.

Third, this pattern has precedent, Severino said. "Something similar occurred just last year. The national vacancy rate was identical during the first three quarters of 2013 before declining again during the fourth quarter."

Severino said the current vacancy-compression "pause" does not signal that the market recovery will reverse, sending vacancy rates higher. …

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