CRE Show: U.S. Office Market is on the Mend
Guests of the "Commercial Real Estate Show" discuss the modest recovery mounted by the U.S. office sector in 2011 and their expectations for the year ahead.
- Atlanta, GA (1888PressRelease) January 17, 2012 - After struggling for several years, the U.S. office market finally began to recover in 2011, and the sector is poised for further modest improvement in the year ahead.
Guests on the most recent episode of the "Commercial Real Estate Show" shared those observations and others in a wide-ranging update on the office market. Topics included key statistics, the performance of different property types, future demand trends and the potential effects of the upcoming presidential election.
Last year, the nationaloffice vacancy rate declined by about 30 basis points when compared to 2010, said Ryan Severino, senior economist for REIS. Asking rents rose by 1.6 percent and effective rents by 1.9 percent, the first increases in those statistics on an annual basis since 2008, Severino added.
"While this was not a spectacular recovery, it largely mirrors the performances of the overall economy and the labor market in 2011," Severino said. "Both of those mounted a rather tepid recovery, and the performance in the office market was more orless congruous with that."
Severino projects continued improvement for office fundamentals but added, "I don't expect 2012 to be what I would consider a strong year for the office sector just because I don't foresee a strong rebound in hiring."
Class A office outperformed B and C properties in 2011 and should do so again in the near future, guests said. "It will probably take at least another year and some real rent increases to move people into Class B and the lower quality product," said John Davidson, a principal of Parmenter Realty Partners.
Fear, uncertainty and doubt about the economy - what he called "the FUD Factor" - are fueling companies' reticence to lease more space, noted Ken Ashley, a senior director in the Atlanta office of Cushman & Wakefield. Another factor is tenants' emphasis on the efficient use of floor space, a trend called "density with dignity," he added.
In the future, the energy, healthcare, technology and education sectors will produce the most demand for office space, the guests predicted.
The improving market also means a reduction in lease incentives, guests said. "We certainly have seen and would anticipate to continue to see moderation of the insane levels of incentives that were going on for tenants through 2009, 2010," said David Tennery, principal of Regent Partners' Office Properties and Development Group. "2011 seemed to have a real shift in the paradigm to more reasonable tenant-improvement allowances and more reasonable free-rent packages."
To learn more about the U.S. office market, listen to the entire show, which is available for download at www.CREshow.com.
The next "Commercial Real Estate Show" will be available Jan. 18 and will provide an update on the U.S. retail market.
About the "Commercial Real Estate Show":
America's "Commercial Real Estate Show" is a national talk radio show about commercial real estate. New shows are available beginning every Thursday at the show website, www.CREshow.com. Shows are also broadcast on AM stations, including Atlanta station Biz 1190 WAFS on Saturdays at 10 a.m. Show podcasts are available on-demand on iTunes and the show website.
The show host is 30-year commercial real estate veteran Michael Bull, CCIM. Michael is the founder of Bull Realty, Inc, a regional commercial brokerage firm with three offices headquartered in Atlanta, Georgia.
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