Guerrieri attributes both conditions to a slowdown in construction completions and a significant slowdown in the amount of sublease space coming on stream. During 4th quarter, slightly less than 100,000 sf of sublease space was added to the market, he reports, compared with the previous four quarters, each of which added, on average, 300,000 sf of sublease space. "Construction dwindled from its peak, only one year ago, by more than 50%," he adds.
Asking rental rates remained steady throughout 2002. The average asking rental rate for class A and class B suburban office properties is $27.75 per sf and $22.19 per sf, respectively.
During fourth quarter of 2002, average asking rates inched up 12 cents per sf, matching the rates in second quarter, according to Grubb & Ellis research. "This can be deceiving, however, as many effective rates are much lower due to concessions, including free rent, tenant improvement, and other concessions," says Guerrieri.
"In some cases, particularly with large credit tenants, a full year of free rent and large tenant improvement dollars have been granted to land these types of tenants to long-term deals. This trend will continue into 2003 until demand for space accelerates," he predicts. "As such, there has been a predictable and clear flight to quality."
Statistics from Grubb & Ellis prove the point. During 2002, the suburban class A office market's net absorption was 1.05 million sf, while net absorption in the class B segment of the same market area was negative 622,107 sf.
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