Office Rents Decline, Vacancies Rise

On the heels of yesterday's dismal news about apartment vacancies comes today's update on office space. Nationwide, effective office rents fell 8.5% in the third quarter compared with the same period a year ago, according to Reis. Companies returned a net 19.6 million square feet of space to landlords in the third quarter, slightly more than the second quarter. The net decline in occupied space totaled a record 64.2 million square feet, the highest negative absorption recorded by Reis since 1980 (excluding the 2001 terrorist attacks.) The vacancy rate hit a five-year high of 16.5%.

Declining rents and rising vacancies are a really bad combination, unless, of course, you are looking for new digs. The biggest office rent declines over the past 12 months came from New York, the epicenter of the financial meltdown. The highest vacancy rates, however, come from areas with poor housing markets and industrial cities such as Southern California, Las Vegas, Phoenix, southwest Florida, and Detroit. Of the 79 metro areas that Reis tracks, office vacancies rose in 72 of them and effective rents declined in 68 of them. Some charts from the WSJ below: