According to the National Association of Realtors (NAR) office market forecast of February 2009, the US office market is expected in 2009 to continue at a faster pace on the downward path it entered in 2008.
According to the data provided by NAR Research in 2008, net office space absorption dropped from 57.2 million sq. ft. in 2007 to only 12.2 million sq. ft., representing a dive of 78.6%. This occurred at a time that completion of new office space increased to 68.1 million sq. ft. (representing an 11.6% compared to 2007 completions). As a result of these developments, the office vacancy rate increased by almost a percentage point, from 12.5% in 2007 to 13.4% in 2008. With a rising vacancy rate office rents barely held their 2007 levels, as they registered a minor decline of 0.4%.
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Office Market Forecast 2009
NAR Research predicts even more negative developments for the US office market in 2009. In particular, it is predicted that net absorption will be seriously negative with occupied office space stock declining by 77.4 million sq. ft. Because of the existing pipeline, supply will not be able to follow the reduction in demand and completions of new office space in 2009 are expected to continue increasing reaching 71.3 million sq. ft. (representing a 4.7% increase over their 2008 levels). Under this demand-supply scenario, NAR Research predicts that the national office vacancy rate will jump almost 3 percentage points, from 13.4% in 2008 to 16.2% in 2009. The significant increase in the vacancy rate is expected to put strong downward pressures on office rents, which are expected to register an average drop of 4.2% in 2009.
Return from Office Market Forecast February 2009 to Market Watch
