NEW YORK CITY-Houston, New York City and Washington, DC lead the office-investment pack, says a newly released study conducted by locally based Integra Realty Resources. Furthermore, the firm's 12th annual Viewpoint study documents what we all are feeling–that the industry is poised for recovery.
Number-One ranked Houston, while reeling from the Enron scandal, still boasts a 7.4% vacancy rate and will gain by a dearth of additional construction. Additionally, TrizecHahn, which owns the Enron building, expects the space to be re-leased within a year.
New York came in at Number Two, despite its current Downtown woes and the fact that it's total “vacancy rate nearly doubled from the 4.5% of the previous year.” Washington D.C., with a 4.5% vacancy rate, came in at No. 3. Nationally, the Integra study reports a downtown office vacancy rate of 10%, “well above” the 7.3% of last year.
Of course, not all boats are going to rise equally, and in an interview with GlobeSt.com, president Sean Hutchinson noted that while most sectors “weathered the recession very well,” no one should expect the hotel market to show signs of life until late next year.
Hutchinson characterizes the industry's state right now as “fragile,” and notes that “full recovery will trail the rest of the economy by a couple of quarters.”
If anything is holding back the office sector, it is owners who have an “inflated view of their building value,” Hutchinson tells GlobeSt.com. “Although investors have money to spend, they're finding it difficult to place–even if they locate a good building that fits their portfolio's profile. If it's already at $500 per sf, they aren't going to achieve their rates of return.”
Hutchinson explained that the unprecedented economic expansion we recently enjoyed left a lot of capital in the pockets of investors who seem be waiting only for prices to regain reasonable levels. “There's a lot of ammo out there,” he comments, “But no one is shooting.
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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.
