"Office building owners are less cocky regarding rates and terms," writes one participant in the survey, "and most are being more responsive to RFPs. The primary reason is the competition from subleases and reduced activity due to overall economic slowdown."In fact, some 64% of our participants project that leasing activity in the fourth quarter will drop more than 10% over last year's Q4 activity, while 29% say it will dip by less than 10%.
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It should be noted that 29% of respondents to this question say they reside in the Northeast while the Midwest and the Southwest each claimed 19% of the participants. Some 17% say they hail from the Southeast and 16% from the West Coast.
If most respondents are looking at a decrease in activity, what do they see their clients doing in what remains of the fourth quarter? Most (77%) see them consolidating and subleasing excess space. While 16% of brokers surveyed predict that their clients will relocate within a district, some 6% say their tenants will pack their bags and head out of the CBD--a possible salve for Big City Jitters? Only 1% say their corporate clients will make the reverse trek. This, most likely, is a cost consideration as much as anything else.
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But another writer seems to believe that relief is only postponed. "Expect a slow recovery to start by second-quarter of 2002," he writes, "unless additional unforeseen circumstances arise."
If, in the short term, at any rate, clients are consolidating, it's no surprise that vacancies will peak by December, and 40% of our participants predict that the rate could be as high as 10%. Slightly less (38%) say it might be as high as 5%. Some 15% of our respondents predict that their markets will remain flat, and only 7% say that vacancies will actually go down.
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There should be no surprise, given the projections for leasing activity and vacancy growth, that most brokers (38%) surveyed say rental rates are going to plummet by as much as 10%. Some 37% say they'll drop, but only by 5%, while 25% say the market will experience no change.
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John Salustri
John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.
