U.S. Office Vacancy Rates Contribute to Decline in Average Asking Rents

May 5, 2009
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If you are about to renegotiate the rent you pay for your office and it happens to be located in a central business district, now is the time to take advantage the current “tenant’s market.” A slowdown in office leasing, combined with an increase in available space, contributed to a 2.2 percent decline in average asking rents in the first quarter of 2009, according to a recent Cushman & Wakefield report on office leasing trends.

At the end of the first quarter, the average asking rent for central business district office space was $39.50 per square foot, compared to $40.37 at the end of 2008. Despite the decline, the average asking rent is still slightly above the average recorded at the end of the first quarter of 2008, at $37.69 per square foot. New construction completions and a big increase in subleased space has also contributed to the rise in office vacancies.

The direct vacancy rate, or space available directly from owners, was 10.4 percent at the end of the first quarter, up from 9.5 percent at the end of 2008. “For tenants, this is a window of opportunity to reduce occupancy costs by renewing leases at more favorable terms or relocating to better or more economical space,” said Maria Sicola, executive managing director and head of Americas Research at Cushman & Wakefield. “For investors or owners, the bright spot is that the direct vacancy rate has remained relative flat, so occupancy rates and cash flows are relatively stable.”

The direct vacancy rate—or space available directly from landlords—measured 10.4 percent at the end of the first quarter, up from 9.5 percent at the end of 2008 to its highest point since the second quarter of 2006. Despite the quarterly rise in overall vacancy in nearly 31 tracked central business districts, average asking rents did manage to climb in 14 cities.