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Author Archives: Rhea Campbell - Bella Terra Partners LLC 2011
U.S. OFFICE VACANCIES REACH 5 YEAR HIGH OF 16.5%
Reis Inc., a New York based real estate research firm, reported 3rd quarter vacancy rates of 16.5%. Couple this with a climbing unemployment rate of 9.8% (Yikes) and there doesn’t seem to be a recovery of any sort happening here.
Rightly so, The Wall Street Journal is reporting (Fed Frets About Commercial Real Estate) that the Fed has concerns about commercial real estate and the speed with which banks are taking their losses.
The fact of the matter remains unless you have jobs growth there is no demand for office space. People can’t or won’t start new companies and existing employers are shedding space not expanding into space.
TIME FOR TENANTS TO CHEER
For tenants, the next two years will offer an opportunity to secure dramatically low cost office space. Here’s why:
CURRENT MARKET CONDITIONS
The unemployment rate increased from 8.1% in February to 8.5% in March. Adding insult to injury, January job losses were revised from 655,000 non-farm payrolls to 741,000. Since the recession officially began in December 2007, the economy has lost 5.1 million jobs with almost two-thirds (3.3 million) of the decrease occurring in the last 5 months. Many are saying we’re skidding across the bottom of this severe recession but I disagree.
Commercial real estate is just beginning to show weakness that will eventually cripple many owners and force a wave of bankruptcies. In fact, 525 W. Van Buren was the first building to be sold in Chicago’s central business district for $130 million, $6 million less than what the seller or investor paid for it five years ago. This transaction is the first example of a significant downtown commercial real estate property changing hands for less than the seller paid. Read more…
