U.S. Office Vacancies Reach Five-Year High

Hui-yong Yu with Bloomberg reports U.S. office vacancies rose to a five- year high in the third quarter, as job losses deepened and employers abandoned space in the recession, property research firm Reis Inc. said.

Vacancies climbed to 16.5 percent from 13.7 percent in the year since Lehman Brothers Holdings Inc. filed for bankruptcy, New York-based Reis said in a report. Effective rents, the amount actually paid by tenants, fell 8.5 percent, the biggest year-over-year drop since 1995.

“The decline in effective rents really accelerated after the fall of Lehman Brothers,” Victor Calanog, director of research at Reis, said in a statement. “Tenants will continue shedding occupied space as jobs are lost.”

Financial firms cut more than 180,000 jobs in the Americas in the credit crisis that brought down or forced the sales of Bear Stearns Cos., Washington Mutual Inc., Merrill Lynch & Co. and Lehman Brothers.

The three months ended Sept. 30 marked the seventh straight quarter in which landlords reported a net loss in the amount of space occupied by tenants. About 19.6 million more square feet were vacant than in the previous quarter, Reis said.

The U.S. is on pace for its second-worst year in terms of net office absorption since at least 1980, the beginning of Reis’s records, Calanog said.

The national vacancy rate was 15.9 percent in the second quarter.

New York vacancies jumped to 11.4 percent in the third quarter from 6.6 percent a year earlier, and the city’s effective rents tumbled 18.5 percent, Reis said.

The drop in rents is about twice the decline New York experienced in 2002, following the Sept. 11, 2001, terrorist attacks. Rents fell 9.3 percent that year, Calanog said.