2009 Global Market Report now available
The Global Market Report can be downloaded from the "Links" section to the right.
Select highlights from the 2009 Global Market Report:
Riding strong upward momentum from 2007, the U.S. office market's performance in 2008 belies the current state of the market, particularly in the Central Business Districts where supply remains tight. The national average effective rental rate for Class A office space downtown climbed 13% to $47.31 per square foot in 2008, while the vacancy rate increased 7%, to 10.3%. The national average effective rental rate for Class A office space in the suburbs rose a more modest 2% to $26.32 per square foot, while vacancy rates increased very marginally to 13%. Vacancy rates in the suburbs are expected to increase more significantly in 2009 as new projects deliver amidst weak demand and layoffs by financial firms reach outward from the CBDs.
Both vacancy and rental rates will get a boost in the longer term from a sudden and dramatic decline in new construction starts. As construction lending has disappeared, there has been a nearly 30% decline in 2008 in new construction contracts for commercial and office buildings. Few construction loans have been committed over the past 12 months, making the pipeline of new development essentially nonexistent.
The industrial sector turned in mixed results in 2008. The national average vacancy rate for bulk warehouse space decreased 17% to 7.6% in 2008, its lowest level this decade, but rental rates slipped 13% to $4.07 per square foot after holding steady the previous two years. Bulk warehouse rents are just pennies above their 2003 level.
The national average rental rate for high-tech/R&D space fall fell 17% to $8.37 per square foot despite a double-digit decline in the vacancy rate to 9.7%. The national average rental rate for manufacturing space fell 5% to $5.30 per square foot as the vacancy rate increased 3% to 7.8% in 2008. That number could change dramatically in 2009-2010 as the U.S. auto industry struggles to retool.
The retail property sector is reeling from a sudden and dramatic drop in consumer confidence and consumer spending. The late-2008 surge in unemployment and uncertainty about what's still to come have led major retailers like Target, Best Buy, Home Depot and Lowe's to curtail expansion plans and close poorly performing stores, while others, such as Dave & Barry's, Linens ‘N Things, Circuit City and KB Toys filed for bankruptcy. The fragile state of the economy is reflected in the empty downtown storefronts where vacancy rates increased 14% to 7.5% in 2008, reversing the 12% decline posted a year ago. However, the national average rental rate for downtown retail space increased 7% to $51.28 per square foot. Power centers and regional malls also struggled. The national average rental rate for regional malls fell 21% while the vacancy rate nationwide increased 15% to 5.6% in 2008. The national average rental rate for neighborhood service centers also fell 10% to $18.55 as the vacancy rate increased 16% to 8.4%.
