US Office Market Trends, Q2 2009
According to the NAR/TWR data, the US office vacancy rate increased by 80 basis points during the quarter, as it climbed to 15.5% from 14.7% in the first quarter of 2009 and from 13.9% in the fourth quarter of 2008. Note that in 2008, the US national office vacancy rate averaged 13.4%. Despite unfavorable office market trends underscored by climbing vacancy rates and slowly declining rents, US office space completions in the second quarter of 2009 increased to 15.04 million square feet from 12.75 million square feet in the previous quarter, representing an increase of 18%. Completions in the fourth quarter of 2008 amounted to 12.89 million square feet, while total office space completions in 2008 amounted to 6.19 million square feet. With rising vacancy rates and negative net absorption office rent declines accelerated considerably compared to the previous quarter. In particular, according to the NAR/TWR data office rents in the US dropped at an average rate of 6.3% in the second quarter of this year, more than double the rate of decline of -3% that was registered in the first three months of 2009. In the fourth quarter of 2008, US office rents registered a minor drop of 0.6%.
The big question of course is what is going to happen in the US office market in the months and years ahead. Will the negative office market trends registered in the second quarter of 2009 continue to accelerate or will they decelerate in the second half of this year leading the market to stabilization and growth sometime in the next 12 months?
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