From Marcus & Millichap: Recent overbuilding and employers’ thinning space requirements have widened the Austin office supply/demand imbalance in recent months, driving metrowide vacancy close to 20 percent for the first time since 2004, according to a fourth-quarter Office Research Report by Marcus & Millichap.
Despite projections for further weakening into the first half of 2010, this downturn will likely be shallower than the tech bust earlier in the decade, as job losses are expected to ease through the end of this year.
“Buyers will remain cautious when approaching deals and continue to hold out for price corrections, given projections for further fundamental weakening,” says J. Michael Watson, regional manager of the Austin office of Marcus & Millichap.
Following are some of the most significant findings from the report:
- Hiring is projected to pick up by year end. In 2009, employers are forecasted to reduce payrolls in Austin by 6,000 positions, a 0.8 percent decline. Office-using businesses are expected to eliminate 700 jobs.
- Office construction will drop off significantly this year as developers are on pace to bring only 650,000 sf online, down from 2008, when 2.7 million sf was added to stock.
- Although office development activity will slow in 2009, contracting demand and oversupply issues are expected to push up metrowide vacancy 200 basis points to 20.8 percent. Last year, vacancy increased 430 basis points.
- This year, more moderate tenant demand will prompt owners to reduce rental rates in an attempt to stabilize operations. Asking rents are forecast to decrease 3.7 percent to $25.29 per sf, and effective rents will end the year at $20.59 per sf, a 7.5 percent annual drop.
0 Responses to “Office rents expected to decline in 2010 as market stabilizes”