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Sunday, October 18, 2009

Offices: See-Through Buildings in LA

by Calculated Risk on 10/18/2009 09:38:00 AM

From Roger Vincent at the LA Times: Southern California's vast desolation indoors

... Almost 51 million square feet of office space in Los Angeles County, Orange County and the Inland Empire is now empty -- more than 17% of the total. ... "These vacancies are a direct reflection on unemployment," said Joe Vargas, an executive vice president at Cushman & Wakefield. "Companies continue to reduce their workforce, or they are not hiring."
Real estate rentals are a lagging indicator of the economy, so the shrinking-space trend is expected to persist well into next year even if the nation's financial outlook continues to improve.
Cushman & Wakefield's Vargas predicts Southern California will remain a tenant's market through mid-2010 and perhaps longer if employment doesn't start picking up.

"This is certainly the worst downturn we've seen," Vargas said. "We're not going to see real improvement until job growth occurs."
Usually the unemployment rate and the office vacancy rate tend to peak around the same time. So, as the unemployment rate continues to rise into 2010, the office vacancy rate will probably increase too.

On a national basis, Reis' forecast is for the office vacancy rate to peak at 18.2 percent in 2010 (currently 16.5%), and for rents to continue to decline through 2011.