Good News Friday 1.22.10

Signs of a Market Bottom…

Office and industrial vacancy rates increased every quarter last year, but the rate of increase declined as the year progressed. In the four quarters of 2009, office vacancy increased sequentially by 80, 100, 50 and 30 basis points while industrial vacancy increased by 70, 60, 30 and 20 basis points. Absorption followed a similar trajectory: Totals were negative every quarter last year, but fourth quarter losses were the shallowest.

We are hearing about other signs of a market bottom: 

  • This could be the year of the long-term lease, replacing the one-year extensions prevalent in 2009. Tenants whose leases expired last year shied away from new long-term commitments given the bleak outlook. But the economy has started to grow again, and profits held up remarkably well through the recession thanks to corporate cost-cutting measures including employee layoffs. Tenants are becoming confident enough to lock in the great deals on offer from landlords.  
  • Tenants’ top priority last year was getting the cheapest space, but many tenants are becoming receptive to upgrading their space, i.e. willing to pay a little more for better space. In the retail market, some tenants were shut out of the best locations during the boom. But vacancies have opened up even in the best centers, and retailers are looking at upgrading their locations.  
  • In a few markets, landlord psychology is beginning to shift. The office vacancy rate continues to rise in San Francisco, but some property owners have reduced their concession packages, believing the worst has passed.  
  • Industrial brokers in some locations including Tampa and Columbus are reporting increasing activity by tenants looking to take advantage of very low rental rates.

Courtesy of Robert Bach, SVP, Chief Economist, Grubb & Ellis

For a free consultation of your commercial real estate needs please contact Sean Thompson at 406.539.0082 or sean.thompson@mtcommercialre.com OR Joe Cobb at 406.579.2999 or joe.cobb@mtcommercialre.com.  www.MTcommercialRE.com

This entry was posted on Friday, January 22nd, 2010 at 2:08 pm and is filed under Market Reports. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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