AuBuchon cites statistics showing that office payrolls continued to deteriorate, posting the third consecutive negative month and seven declines in eight months. Also, payrolls in the business services sector "have begun to weaken materially revealing a third consecutive down month, the first such sequential decline since February '01," he concludes in the report. Overall, office payrolls have lost 91,000 jobs in 12 months and 232,000 jobs since July 2007.

Although the report focuses on office payrolls, it points out that the payrolls "are not an exact predictor of the office market" because existing vacancies, anticipated supply growth and projected rent growth all play a role in shaping the office market. Another factor is sublease space. The US office market is "already seeing anecdotal evidence that sublease space is resurfacing," AuBuchon tells GlobeSt.com. The sublease space, if it continues to grow, will suppress rent growth as it competes with direct space and offers lower rates.

AuBuchon, however, also points to uncertainty regarding the depth and duration of the economic slump, the payroll cuts and their impact on the office market. "The financial roots of the global economic slowdown have created an environment with mass layoffs and cost-cutting measures that could hurt those markets and REITs," he says. "Recent wild variations in the financial payroll data are evidence of the uncertainty."

Until those wild swings dissipate, AuBuchon believe markets and building owners that depend significantly on finance-related tenants "have incremental risk in the near term." His report examines the Top 25 office markets, based on total square footage, in analyzing the impact of job losses on those office markets. Just as job losses foretell a slumping office market, he says the first sign that the downturn is reversing will be a quarterly increase in office payrolls.