Tuesday, July 03, 2012

Reis: Office Vacancy Rate unchanged in Q2 at 17.2%

by Calculated Risk on 7/03/2012 08:42:00 AM

Reis reports that the office vacancy rate was unchanged in Q2 at 17.2%. Comments from Reis Senior Economist Ryan Severino:

The office sector absorbed 4.138 million SF during the second quarter, the sixth consecutive quarterly gain in occupied stock since the beginning of 2011. However, national vacancies ceased falling. This is reflective of the ongoing weakness in the labor market recovery.
...
National asking and effective rent both grew by 0.3% during the second quarter, but this represents a slowdown from the 0.5% and 0.6% growth rates that asking and effective rents respectively achieved during the first quarter. Annual gains of 1.6 and 2.0 percent, respectively, are virtually unchanged from last quarter, and remain feeble.
...
Supply growth in the office sector remains muted. During the second quarter of 2012 only 1.606 million square feet of office space were completed, the equivalent of one large office building. This represents the lowest quarterly level on record since Reis began tracking quarterly market data in 1999. Nonetheless, demand for space during the quarter was so weak that even with such little supply being delivered, the level of absorption that we observed during the quarter was insufficient to generate a vacancy rate decline.
Office Vacancy Rate Click on graph for larger image.

This graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

Reis is reporting the vacancy rate was unchanged at 17.2% in Q2, and down from 17.5% in Q2 2011. The vacancy rate peaked in this cycle at 17.6% in Q3 and Q4 2010.

As Reis noted, there are very few new office buildings being built in the US, and new construction will probably stay low for several years.