The US office market continued deteriorating in the third quarter of 2009, according to recently released data by the National Association of Realtors (NAR) and CBRE Econometric Advisors (CBRE-EA).
In particular, according to the data released, the US office vacancy rate continued rising, as it climbed from 15.5% in the second quarter of 2009 to 16.1% in the third quarter. Note that the US office vacancy rate in the first quarter of 2009 averaged 14.7%, 140 basis lower than the third quarter average.
The vacancy rate increase that was registered in the US office market in Q3 2009 was the result of a drop in demand for office space, as measured by the occupied stock, and an increase in supply. In particular, the occupied office space stock declined in the third quarter of 2009 by 5.2 million square feet (negative absorption).
Note though that the Q3 2009 decline in demand compares favorably with the decrease in occupied stock that took place in the previous quarter, which was three times higher as it amounted to 15.7 million square feet. However, the trend of decelerating declines in office space demand is not predicted to continue in Q4 by the NAR/CBRE-EA forecast.
On the supply side, the completion and entry in the market of 16.4 million square feet of new office space helped further push the national office vacancy rate up in Q3 2009. Note that office space completions in Q3 2009 were higher than new supply in Q2 and Q1 when 15 and 12.7 million square feet of new office space were completed, respectively.
As a result of the deteriorating fundamentals in the US office market, rental rates declined slightly by 0.9% in Q3 2009. This rate of decline respresents considerable deceleration of the downward trend registered in the previous quarter, when office rents decreased by 6.3%, following a decline of 3% in the first quarter.
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