Magazine article Mortgage Banking

Office Sector Still Struggling. (Commercial)

Magazine article Mortgage Banking

Office Sector Still Struggling. (Commercial)

Article excerpt

ACCORDING TO A FIRST-QUARTER 2002 REAL estate market update by Grubb & Ellis Co., New York, the economy is recovering, but job growth remains anemic and corporate earnings have been disappointing.

Although the numbers are beginning to look good, the recovery remains fragile. As a result, America's office landlords found no relief in the first quarter of 2002, and continued struggling with the bleak real estate market conditions established more than a year ago, according to Grubb & Ellis. The Grubb & Ellis first-quarter market intelligence report also found the following:

* The overall national vacancy rate rose by more than a percentage point for the fifth consecutive quarter, ending the first quarter at 15.68 percent; however, this most recent increase of 119 basis points (bp) is less than the prior two quarterly increases of 147 bp in fourth-quarter 2001 and 150 bp in third-quarter 2001.

* Suburban and central business district (CBD) vacancy rates finished the first quarter at 17.30 percent and 12.79 percent, respectively.

* Net absorption was negative by more than 14.6 million square feet (MSF), with the outflow of tenants almost evenly divided between class-A and class-B/class-C properties. By comparison, the market absorbed an average of +21.2 MSF per quarter in 1999 and 2000.

* While tenants continued to vacate office space, the construction pipeline added 20.5 MSF of new competitive space (both multi- and single-tenant) that was begun prior to the recession. …

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