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Entries Tagged as 'Office Vacancy Rate'
Feb 26
Fidelity Viewpoints (excerpts)
By Lisa Emsbo-Mattingly, Director of Economic Analysis
February 19, 2010
"I find the leading indicators extremely optimistic for job growth. The best long-term indicator of employment is corporate profitability, which became more robust as 2009 progressed. (See chart below.) At the same time, the U.S. economy grew at an annualized rate of 5.7% in the fourth quarter of 2009, the fastest pace in six years, according to the U.S. Commerce Department. As corporate profits continue to recover in 2010—and I expect they will—this can translate into job creation."
"Temporary hiring is a
reliable leading indicator of future permanent hiring. At this stage of
the economic recovery, corporations are still averse to hiring full
time. But demand for temp workers surged in the second half of last
year. During the previous two business cycles, temp hiring eventually
led to permanent hiring. The Conference Board's index of employment
trends is rising at the fastest six-month pace since 1994."
Feb 22
A newsletter I received today is a bit more positive on the recovery and does make a good point that despite high unemployment our national office vacancy rate is better that expected.
Monday Morning Outlook
Brian S.
Wesbury - Chief Economist First Trust
Robert Stein, CFA - Senior
Economist First
Trust
Over the past
year, as we have defended our forecast of a V-shaped recovery and the economy
has clearly turned upward, two things have happened. First – slowly and quietly
the consensus forecast for economic growth has been lifted – to roughly 3% real
GDP growth from an anemic 2%. We expect this to continue as the consensus
forecast continues to move toward our 4%+ forecast.
Second – the list
of worries over the economy has grown. Remember credit card fears? Well,
delinquency rates are declining now. What about Credit Default Swaps (CDS’s)?
Yeah, what about them? As you read this, AIG is writing the value of these
contracts up. And who could forget Dubai? Oh, you already did?
Well, no matter
how many of these economy killers disappear into the mist of history, there are
more to take their place. A commercial real estate collapse, the “real”
unemployment rate, housing foreclosures, ARM resets, deficits,
government-created uncertainty, the lack of bank lending, universal healthcare,
cap and trade, looming tax hikes, China, Greece, and don’t forget the unwinding
of economic intervention by the Fed and Treasury and the petering out of
stimulus.
It’s almost as if
the better the economic data, the more things people worry about.
We don’t want to
say that all these worries are not important, or misplaced. There are problems
and issues, but we do believe they are being overblown. For example, the
national office vacancy rate is 17.5% – high – but still lower than it was in
the 1990-91 recession, and lower than one would expect when the unemployment
rate is 9.7%. And now with unemployment declining, vacancy rates should fall as
well.
Many people fear
a “real” unemployment rate of 16.5% (which includes the official unemployment
rate plus marginally attached workers). But this rate is always above
the official unemployment rate and moves along with it. In other words it
offers no new information. Everyone knows unemployment is high, but recoveries
always begin when unemployment is high.
Government
deficits are high, and it is true that government activity is creating
uncertainty, but this has stirred political push-back rarely seen in the US. It
is very likely that the awakened and renewed political energy showing up these
days will finally force Congress to address the issues of its long-term unfunded
liabilities and its out-of-control spending. In other words, the worry and fear
may finally produce action.
Finally, bank
lending, or the lack of it, is bothering many. Conventional wisdom suggests
that the economy cannot recover (at least strongly) without a pick-up in bank
lending. However, this theory leaves us wanting. After declining in the past
two years, total loans and leases held by commercial banks stood at $6.76
trillion at the end of 2009, which was above year-end 2007 levels or any time
before that. In other words, bank lending is currently at levels above those
that existed during what most people call a “bubble” in bank
lending.
Much of this is
about attitude. If you want to find things to worry about, you always can.
It’s like hypochondria. But, in the end, with monetary policy accommodative and
the panic over, the economy is heading upward. And it’s funny how so many
problems seem to dissolve when growth gets underway.
Feb 5
WASHINGTON (AP) -- The outlook for jobs became a bit less bleak with January's unexpected decline in the unemployment rate, which fell to 9.7 percent from 10 percent as more people said they had jobs.
Still, Friday's unemployment report showed just how deep the job crisis remains. The government now estimates 8.4 million jobs vanished in the Great Recession, and economists think the nation would be lucky to get back 1.5 million of them this year. And they say it will take at least three to four years for the job market to return to anything like normal. <End>
Not particurally good news for the office market. Employment is directly related to occupancy. If the econimists are correct, it means office space occupancy will take three to four years to return to normal vacancy rates in the 8% - 12% range.
Feb 2
NEW YORK, Feb 1 (Reuters) - The worst may not be over for commercial real estate loans as vacancies remain high and rents decline, threatening the financial system with substantial losses, Standard & Poor's said on Monday.
"The fallout from commercial real estate exposures for banks has yet to run its course, in our opinion," S&P said in a report.
Although problems are already evident in the homebuilding and commercial construction sectors, they have yet to be felt in the larger mortgage lending and multifamily sectors because interest rates are low and cash flows are adequate to service debt, the rating agency said.
However, as interest rates rise and rent rolls decline further, delinquencies will rise and prices will fall further in these sectors as well, S&P said.
"Even though most highly exposed banks with weaker balance sheets are already rated below investment grade, more downgrades are possible," S&P said. Indeed, S&P already has negative outlooks on about 75 percent of the rated banks with the largest commercial real estate exposures, indicating they are at risk of a downgrade.
Despite the potential for heavy losses, however, most banks' capital is sufficient for them to pull through as long as the losses are realized over a few years and liquidity is maintained.
"Commercial real estate exposure generally tends to represent a higher proportion of smaller, largely unrated community banks' exposures," S&P said. "Therefore, there is a greater proportion of risks in the unrated banking sector.
Jan 13
 Jan. 12 (Bloomberg) -- Manhattan has 38 percent more office space for rent than a year ago as Wall Street job cuts and a weak economy reduced demand, Cushman & Wakefield Inc. said. The vacancy rate in the fourth quarter was unchanged from the third.
Available space totaled 43.8 million square feet at the end of 2009, compared with 31.8 million a year earlier, the New York-based brokerage said today in a report. That’s equivalent to 11.1 percent of Manhattan’s office space, the same as at the end of September, according to Cushman.
“We’re calling this close to the bottom,” said Joseph Harbert, Cushman’s chief operating officer for the New York region. “Rents will go down a bit from here, vacancies will go up a bit, but you won’t see any dramatic movements on either of those fronts in the next nine months.”
New York has lost about 40,000 financial services jobs in the past two years, according to the city’s Independent Budget Office. Earnings for the top 10 largest U.S. banks recovered in 2009 after the companies lost a total of $27 billion in the fourth quarter of 2008. Analysts estimate they will report a combined $3.84 billion profit for the fourth quarter of 2009.
In the second half of 2009, new leases were signed on 9.9 million square feet of space, compared with 6.4 million in the first half, according to Cushman. There were 10 leases for more than 100,000 square feet in the fourth quarter, twice the number from the same period of 2008.
Vacancy Rate
The office vacancy rate declined for two straight months after rising to 11.4 percent at the end of October, Cushman said. The rate was 8 percent at the end of 2008.
Asking rents in Manhattan averaged $55.52 a square foot at yearend, down 20 percent from December 2008.
Sublease space, or surplus offices marketed by tenants rather than landlords, rose to 10.6 million square feet from 8.2 million square feet at the end of 2008. It was down from a peak of 11.4 million at midyear. High sublease availability tends to depress rents because tenants have less incentive to seek top dollar for the space.
“The wholesale dumping of space is over, and has been over for some period of time,” Harbert said. “At some point we’re going to go back to recognizing we live in a space-constrained city.”
Midtown Rents
Asking rents in Midtown Manhattan fell 22.5 percent to an average of $61.82 a square foot, Cushman said. The vacancy rate was 12 percent, up from 8.5 percent a year ago and little changed from the third quarter.
So-called taking rents among Midtown Manhattan’s Class A buildings, the top-quality space, have fallen 42 percent to $52 a square foot since the first quarter of last year. They climbed from $50 a foot in the third quarter, the first sequential rise in at least two years. The increase may be another sign of the market bottoming, Harbert said.
Asking rents are the rents landlords advertise; taking rents are based on the terms of signed leases. They tend to be lower because they include concessions including contributions to interior construction costs and periods of free rent.
Lower Manhattan rents averaged $40.36 a foot, down 15.7 percent from a year earlier. Vacancy was 9.6 percent, down from 9.9 percent in the third quarter.
The area’s vacancy rate may rise to as high as 14 percent in the next 15 months, in part because of Goldman Sachs Group Inc.’s plan to move its headquarters to a new skyscraper in Battery Park City from 85 Broad St. and other downtown buildings, Harbert said.
In Midtown South, roughly the area between 34th and Canal streets, rents dropped 12.8 percent from a year earlier to $47.17 a foot. Vacancy was 10 percent, up from 7.1 percent a year earlier and 9.4 percent in the third quarter.
To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net
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