National Office vacancy report provides opportunity to improve vocabulary; Enervated

The office vacancy rate for the nation remains high, at 17% and the rate of improvement has slowed.  REIS the real estate analytics and data provider who is considered one of the best firms in the real estate market information business just released a new report for the 2^nd Quarter of 2013. 

The major news is that there is very little velocity and activity in the market that is absorbing the vacant space. We need job growth! On a year‐over‐year basis, the vacancy rate fell by a scant 30 basis points or 3/10^th’s of 1%.  With the labor market unable to generate significant office‐using employment, REIS describes demand for space as remaining enervated. According to the dictionary that is a verb of Latin origin that means “to deprive of force or strength; destroy the vigor of; weaken.”  It is also synonymous with enfeeble, debilitate, sap, exhaust.  (To us that sounds either “tired” or a “bottom without a recovery”?)

Without even modest demand, the decline in the national vacancy rate will not accelerate. National vacancies remain elevated at 450 basis points above the sector's cyclical low, recorded in the third quarter of 2007 before the recession began that December. Rents are still nearly 8% lower than they were before the recession.

REIS also reported that there is little to no new demand for space in existing buildings in the market. Clearly, the market is favoring new space at the expense of old space at this juncture. Nonetheless, it is somewhat heartening to see a bit of an increase in new construction activity. Nationally developers have not delivered as much new space since the second quarter of 2010 when many projects were completed only because they had been started before anyone fully grasped the magnitude of the Great Recession.

REIS reported that rents both asking rents and effective rents grew but at a rate of 40 basis points, 4/10ths of 1 %.  At these levels of rent growth and tepid or “enervated” space demand existing building owners are not likely to see pre-2008 office rents for many more years.

You can read more at http://www.calculatedriskblog.com/2013/07/reis-office-vacancy-rate-unchanged-in.html#T55zPEiiW7xlAxoi.99

To hear a good summary, in about 4 minutes, see this video that features Victor Calanog, PhD, VP and Economist of REIS. ( He points out that SF, San Jose, New York and Houston are the bright spots) You can watch a brief video of the REIS Office Market Report here: http://player.vimeo.com/video/67819803