Jobs Pose Big Question for Forecast

SANTA ANA, CA-Just when the job market will abate will have a big impact on when the softening in the US office market slows, according to a new report. The first look at the second-quarter US office market shows that the market “has settled into an aggressive softening cycle, the length of which will depend on when job losses dissipate,” according to the new report from Santa Ana-based Grubb & Ellis.

The summary of market conditions, by Grubb & Ellis senior vice president and chief economist Bob Bach, cites a number of statistics illustrating the continuing decline in the market, ranging from rising vacancies to falling rents to increases in negative net absorption throughout the country. The figures show that New York City led all other markets on the downside by giving up 3.3 million square feet of occupied space to negative net absorption in the second quarter.

In his forecast for the office market, Bach describes a sequence of events that “seems plausible,” depending on when job losses abate. First in the sequence is that GDP turns positive in the second half of 2009. Next, the labor market bottoms out in mid-2010 but growth is negligible until 2011. Next, vacancies peak and begin to turn down in the first half of 2011. Then rents bottom out and begin to turn up in the second half of 2011.