A new report from New York City-based real estate research firm Reis found that the U.S. office rental space market still has a high vacancy rate and sluggish growth due to an overall bleak economic outlook.
The vacancy rate across the U.S. office rental market stood at 16.9 percent in the fourth quarter of 2013--the same level as the previous quarter and just under the Q4 2012 rate, Reis found.
The real estate research firm says vacancies are still high because of the weak economy, which is not producing jobs that require more office space. "With most of the employment growth continuing to come from low-paying, low-skilled jobs that don't utilize office space, demand remains weak," the report said, according to Reuters.
In 2010, following the recession, the national vacancy rate peaked at 17.6. The latest rate is an improvement from that period, but remains far higher than the low recorded in the third quarter of 2007.
High vacancies generally allow business owners to find lower rents, but the Reis report found that rents actually crept up 0.7 percent from the third quarter of 2013.
Office space demand is expected to improve in the new year, but only if the amount of high-paying, high-skilled jobs increases. For 2014, Reis forecasts that U.S. office vacancy rates should decline by half a percentage point while rent asking-prices should increase by nearly 3 percent--the highest gain since 2007.
There are more than 3.4 billion square feet of occupied office space, Reis said, 79 million less than the 2007 peak. At the current rate, The Wall Street Journal says that it will take two more years for the market to reach its former high levels.
"The pace of the recovery is still rather sluggish," Ryan Severino, a senior economist at Reis, tells the Journal. "But a lot of the things that held the market back [last] year probably won't be in place in 2014. We're optimistic that 2014 can be better than 2013 was."
What do you think? With relatively low rents and high vacancy rates, is this the time to expand your company's offices? Let us know how optimistic you are in the new year.