Maria Sicola, senior managing director of analytics at C&W and a member of GlobeSt.com Think Tank, an advisory board of real estate professionals, notes that last year was an "anomaly." In many markets, most notably the Downtowns, vacancy rates were at 5% and less," she says. "So the rising vacancy rates through mid-year 2001 do no present an imbalance in most markets," she adds.
At the end of Q2 2001, the national Downtown vacancy rate stood at 9.4%, and at 13.6% in the suburbs. C&W predicts the Downtown rate will level off between 10% and 12% through 2003, and between 14% and 16% in the suburbs.
Internet and high-tech firms have brought large amounts of space back to the market, Sicola notes, climbing from 41.6 million sf at the end of 2000 to 75.3 million sf year-to-date. That has been the "driving force behind the increase" in vacancy rates, she says.
Last year, rental rates skyrocketed due to the expectation of rising demand for space, particularly those locales with high-tech firms. Rents in those markets such as Silicon Valley, Boston, and Midtown South here have declined dramatically this year. For the balance of 2001 rents, are expected to slip even further, albeit more slowly, between 3% and 5%.
The horizon is not without its clouds, however. "Sublease space along with new construction scheduled through 2003 could lead to disequilibrium, Sicola says, "particularly in technology markets that lack a diversified economic base. The suburbs face a more troubled outlook due to a higher level of building activity, much of its speculative, according to the report.
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