National vacancy rates bumped up for both office and industrial space in the second quarter of the year. Continued weak demand for new space on the part of both service businesses and manufacturers, plus the flood of new and renovated space that has been built or redeveloped during the past half-decade, still weigh heavily on just about all of the metro real estate markets throughout the nation.
Continued demand weakness until at least the fall of this year will likely lead to marginally higher vacancies and lower average rents in many markets. But we can take some heart from the fact that the vacancy increases recorded during the April-June period of this year were of much smaller magnitude than over the previous several quarters.
U.S. office vacancies hit 14.6%
The second quarter of 2002 saw another jump in downtown and suburban office vacancies throughout most of the nation, according to data from the most recent survey conducted by commercial brokerage/research firm CB Richard Ellis.
Following an increase of 1.0 percentage points between the fourth quarter of last year and the first three months of 2002, the national average office vacancy rate rose another 0.4 percentage points during the April-June period of 2002, to 14.6%.
The Q2/2002 level of downtown vacancies in office buildings was 0.4 percentage points greater compared to the first quarter of this year, and 3.8 percentage points higher than during April-June 2001. Suburban vacancy rates moved up 0.3 percentage points over the quarter, and remained well above the downtown level. The nation's suburban vacancy rate during the second quarter of 2002 came in at 15.9%, or 4.4 percentage points higher than during April-June of 2001.
The tightest office markets among major metropolitan areas nationwide during the second quarter of 2002 were Sacramento (9.9%), Manhattan (9.4%), and Washington, D.C. (8.8%). None of the other 47 market areas surveyed by CB Richard Ellis during this frame had a vacancy rate below 10%.
Among those metropolitan areas that recorded office vacancy rates well above the second-quarter national average were Columbus, Ohio (22.0%), Dallas/Ft. Worth (21.8%), Atlanta (20.0%), Kansas City (19.7%), and Salt Lake City (19.4%).
The Detroit metro area recorded the highest Q2 downtown office vacancy rate (25.0%), while the San Francisco (22.8%), Columbus (22.0%), Dallas-Ft. Worth (21.3%), and Salt Lake City (21.3%) suburban markets had the most vacant space as a share of total market during the same period.
Industrial vacancy rate up slightly in second quarter
Demand for production and warehouse space continued weak right into the middle of this year. The national availability rate for industrial space increased from 10.8% during the first quarter of 2002 to 11.2% during the April-June period of this year.
The national industrial vacancy rate has risen for six consecutive quarters. Only one of the 42 areas — Long Island, N.Y. — examined by CB Richard Ellis for their industrial market survey recorded a lower vacancy rate during the second quarter of 2002 than in April-June of last year.
The April-June 2002 industrial vacancy rate was 2.9 percentage points higher than that recorded during the second quarter of 2001.
Between the first and second quarters of 2002, industrial vacancy rates rose most sharply in the Baltimore, Austin, Kansas City, and Seattle metropolitan areas. Over-the-year increases were steepest in Austin (+16.6% between Q2/2001 and Q2/2002), Seattle (+10.7%) and St. Louis (+9.7%).
Highs and lows of industrial vacancy
(% of total space available for lease in large industrial buildings, Q2/2002)
|The High Five||The Low Quintet|
|Note: Q2/2002 national average vacancy rate = 11.2%
Source: CB Richard Ellis
|Jacksonville||24.0||Long Island, N.Y.||6.0|
|Ft. Lauderdale||18.9||Portland, Ore.||7.5|