SOCAL OFFICE PROPERTY SALES UPDATE

Office Property Sales Update

“We’re seeing no significant changes in vacancy rates or rent growth, so the fundamentals in commercial real estate still seem to be respectable,” notes NAR Chief Economist Lawrence Yun. “Under normal circumstances, near-full occupancy coupled with positive rent growth would be of strong interest to investors, but we’re not seeing that. The credit crunch has filtered into the commercial real estate market.”

There is a lag factor in the current office market to backfill space by tenants who moved into newly constructed space. At the same time, concerns about the overall economy are causing some tenants to put expansion or relocation plans on hold. These present a challenge to timely and cost-effectively lease space in older office buildings.

Since the level of new supply will be greater this year, office vacancies are expected to rise to 13.3 percent in the fourth quarter from 12.5 percent in the last quarter of 2007. Annual rent growth in the office sector is forecast at 3.5 percent in 2008, following an 8.0 percent gain last year.

Estimates for the first quarter show areas with the lowest office vacancies include New York City; Honolulu; Long Island, N.Y.; and San Francisco, all with vacancy rates of 9.4 percent or less.

Net absorption of office space in 57 markets tracked, which includes the leasing of new space coming on the market as well as space in existing properties, should total 38.5 million square feet in 2008, down from 57.3 million last year.

Office building transaction volume in 2007 totaled a record $211.0 billion, compared with $133.5 billion for 2006. Equity funds accounted for 40 percent of office investment last year. Foreign investors purchased a record $17.7 billion in office buildings last year.

Jodi Summers
Sotheby’s International Realty
jodi@jodisummers.com

listing websites
http://www.2542manchesterblvd.jodisummers.com/
http://www.3619motorave.jodisummers.com/
http://www.3760motorave.jodisummers.com/

blogs +
http://www.SoCalInvestmentRealEstate.com
http://www.SoCalIndustrialRealEstateBlog.com
http://www.SoCalOfficeRealEstateBlog.com
http://www.SoCalGreenRealEstateBlog.com
http://www.SantaMonicaLandmarks.com
http://www.SantaMonicaPropertyBlog.com

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Only put off until tomorrow what you are willing to die having left undone. -Pablo Picasso