Tenants May Gain Clout In Office-Rental Market
RealEstateJournal | Tenants May Gain Clout In Office-Rental Market
Office landlords had a heyday in 2006 as rents rose at the fastest pace in six years. Yet there are signs that conditions could be turning a little more in the favor of tenants.
Newly released data by Reis Inc., a New York real-estate research firm, show that office rents rose 9% nationally last year, the heftiest increase since the height of the technology boom in 2000. However, the report also found that demand for new office space slowed sharply near the end of last year, a sign that large rent increases may not continue.
Demand for office space is measured by tracking the “absorption” rate, a closely watched number that quantifies the change in the net amount of occupied space. In the fourth quarter, tenants in the nation’s 79 largest markets absorbed a net 7.6 million square feet of space, according to Reis, compared with 11.6 million in the third quarter and 15.9 million in the second.
“It is clear that investors cannot expect the same pace of rent growth without a more cooperative level of net absorption,” said Lloyd Lynford, Reis’ chief executive. He noted that slowing growth in demand for office space tracks closely with the slowdown in employment growth in the second half. (more)