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Report: Office Vacancy Rate falling, “nowhere near the low vacancy that will result in new construction of office space”

October 13, 2013

BY Bill McBride and From Roger Vincent at the LA Times: Southern California office rental market improves slightly

Office vacancy in Los Angeles, Orange, Riverside and San Bernardino counties was 17.5% at the end of the third quarter, Cushman & Wakefield said, down from 18.4% a year earlier. Landlords asked for average monthly rents of $2.33 per square foot, an increase of 5 cents from the same period last year.

“I don’t see a significant demand for additional office space and increasing rents in coming quarters,” [broker David Kutzer of Newmark Grubb Knight Frank] said. “We’re not turning the corner to what we consider really healthy markets, and we’re nowhere near the low vacancy that will result in new construction of office space.”
This is an important point – the vacancy rate for office buildings is slowly declining, however it is not close to the level that will lead to significant more investment (important for employment and GDP).
Note: Reis reported the national office vacancy rate (large cities) declined in Q3 to 16.9% from 17.0% in Q2. I’d post a graph comparing the office vacancy rate and private fixed investment in offices, but the data for office investment is currently not available due to the government shutdown.

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