Office vacancy rates continue upward trend
- July 8, 2009
Rising unemployment and corporate downsizing continue to take a toll on commercial real estate. At the end of the second quarter, U.S. office vacancy rates stood at a four-year high — at 15.9 percent. Plus, rents continue to slide and were down by the largest amount in seven years, to an average of $23.42 per square foot.
That’s the picture painted by real estate research firm Reis Inc. of New York, which tracks 79 major markets, including Washington, D.C. The district is faring better than other metro cities with a vacancy rate of 10 percent. Yet, local firms say this is the first time the district has seen a double-digit rate since the late 1990s.
For Northern Virginia, the overall office vacancy is 14.5 percent — up from 13.6 percent in the first quarter, according to the McLean office of Cushman & Wakefield. Meanwhile, office rents are averaging about $29 per square foot.
Government spending in Washington as part of the stimulus package is expected to help the region continue to best national averages. And there is one silver lining amid the market weakness: “Large tenants are taking advantage of favorable new lease terms …” says Jude Collins, a senior director for Cushman & Wakefield in the firm’s second-quarter market report. “While renewals remain common, competing landlords are increasing their incentive packages to entice new leasing.”