An increase in the leasing of office space bodes well for the economy. It is a sign companies are expanding with job opportunities.
For the 12 months ending June, 161.3 million sq. ft. of office space was leased. This is a 5.7 percent increase for the 12 months ending in March.
But what is happening is companies are leasing the same space they had before or less. As leases expire companies are downsizing if they can and they are taking advantage of lower rentals as building owners struggle to keep space filled.
The office space vacancy rate is 17.4 percent, the highest in 15 years.
Briefly, the expectation is the commercial market will show signs of recovery in 2011. The good news is there are signs of the recovery starting now in California.
Commercial Real Estate has yet to bottom out. Vacancies are up and rents are down. REALTOR.org has an article with more detail looking at office, industrial retail and multifamily markets.
You can find other recent posts on the commercial market here and here.
In prior posts (here, here and here) we discussed the worrisome situation with commercial loans coming due and the potential for foreclosure. The news continues to be grim.
Reuters and REALTOR.org report that rents fell 0.2 percent and vacancy rate rose to 17.2 percent, the highest since 1994.
Timothy Geithner. Treasury Secretary, said commercial real estate loans continue to be a problem for the institutions holding the paper. But he feels we can manage the situation.
Commercial real estate is not doing well in Cochise County as in the rest of the state and county. The vacancies in Benson are typical for other towns in the county. So lets look at Commercial Real Estate – the numbers.
The on-line REALTOR® Magazine (realtor.org) published an article on the continuing decline of the commercial market. Moody’s Investors Service reports that commercial prices fell 1.5 percent in Ocotober and they are now 36.4 percent lower than in Ocotber of 2008 and 43.7 percent below their peak in October of 2007.
On November 7 we published a post titled, “Commercial Real Estate Bottom” in which PricewaterhouseCoopers and the Urban Land Institute, predicted that commercial real estate values will decline an average of 40 percent from their peak in 2007.
That forecast has now been met and will most likely be exceeded. And as we reported on November 17 there are “commercial real estate debt maturities [that] will spike at $1.8 trillion in 2012 and many are poor-quality loans”. So anticipating further declines is not unrealistic.
We follow and report on commercial market for it is one of many indicators of our overall economy.
The U.S. Internal Revenue Service announced changes to tax rules Tuesday that make it easier for commercial property owners to refinance. (more…)
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The Indicator
The Summer 2010 edition of The Indicator--the quarterly newsletter of the Cochise College Center for Economic Research is now online. Check it out by
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