Office Absorption Rate Negative for First Time

BOSTON-The office absorption rate was negative for the first quarter of this year according to Torto Wheaton Research, a commercial real estate market research firm based here. Net absorption in the 53 markets that the firm covers was a negative 16.9 million sf, down from a positive 19.9 million sf in fourth quarter of last year.

Jim Costello, senior economist at Torto Wheaton does not think the commercial real estate market is in real trouble. “On the face of it when you see the big negative absorption rate, you could think the market is going in the tank,” he tells GlobeSt.com. “But when you take it apart, you see a lot of sublease space in there.”

According to Costello, in the first quarter 20 million sf came into the market but 17 million of that space was sublease space. “The core demand was three million sf,” he points out, which suggests a slowdown. This could be due to a combination of two concurring events–first, the jobs report indicated that as many jobs were lost in the past month as were created in the entire first quarter. Also, while tenants do have business that needs space it could be that many are waiting to see how the market will play out.