U.S. office vacancies hit 15.2% and are rising
U.S. office vacancies hit 15.2% and are rising – WSJ
WSJ reports cos, struggling to cut costs, dumped a near-record
25 million square feet of office space in the first quarter,
driving vacancy up and rents down, according to data to be
released today by Reis. Businesses that needed to lease space
took advantage of the market weakness to extract concessions
from landlords. But the trends exacerbated financial woes
for owners, especially those who owe more on their mortgages
than their properties’ current value.
The office vacancy rate nationwide rose to 15.2% from
14.5% in the previous quarter, and likely will surpass
19.3% over the next year, according to Reis.
That would put the vacancy rate above the level during
the real-estate bust of the early 1990s,
the worst on record. Effective rents, which include free
rent and other landlord concessions, fell 2% in the first
quarter to a national average of $24.16, the largest drop
since the first quarter of 2002, according to Reis. Sublet
space, on average, is going for between 10% and 15% less
than what landlords are charging.
The weakening commercial real-estate market is posing
yet another threat to the ailing economy because it
is causing the value of buildings to plummet, often
to less than the amount of their mortgages.
In one closely watched transaction earlier this week, the
marquee John Hanock Tower in Boston was valued at $660.6
million in a foreclosure auction, less than half of its
$1.3 billion price in 2006. Washington policy makers are
scrambling to extend bailout programs to help shore up
commercial real estate.
