Metro Area Office Market Vacancies Jump in Second Quarter

Second quarter results announced in a report by Colliers International, a leading global real estate services firm, reflect the continued effects of the recession on office properties as occupied space declines.

Vacancies increased in downtown and suburban office markets across all classes of office space, with prime office space in downtown markets showing the smallest vacancy increase. Office tenants gave back 25.2 million square feet of space, according to the report.

Construction projects are not faring any better as activity in that area is expected to decline further; it already is at half the levels recorded just one year ago. Rental rates for office space also fell in nearly all markets surveyed by Colliers.

“While it looks like the worst has passed, the economy, and more importantly the labor market, is expected to show anemic growth in the near term, leading to an extremely sluggish office space market for the foreseeable future,” says Ross Moore, executive vice president and director of market and economic research for Colliers International. “There are now more reasons for optimism compared to just a few months ago, but indicators such as the recently-issued lending data show firms have little appetite for expansion and instead remain focused on reducing costs and watching their bottom line,” he continues. “We expect further increases in office vacancy and falling rents for the balance of 2009.”