"It won't be a V-shaped recovery; it'll be more like an inverted salad bowl," Harbert quipped. Similarly, Matt Van Buren, executive managing director for CBRE's New York tri-state region, said at his company's Wednesday morning forecast breakfast, "We don't think there will be an extreme turnaround in 2010, but it will look more like the better, second half of 2009 than the first half." He noted that as "a canary in the employment coalmine," temporary jobs grew in the second half of the year after declining in the first six months.
Wednesday's report from CBRE Econometric Advisors says the office vacancy rate nationally increased by 20 basis points to 16.3% at the end of '09. It marked the ninth consecutive quarterly rise, but CBRE-EA says the trend of severe increases "appears to be abating," adding that some markets have approached their cyclical peaks. In Manhattan, Q4 vacancy ticked downward to 11.1% in December, marking the second consecutive monthly decline, according to C&W.
Harbert said the vacancy rate could still go back up, but won't rise beyond the 12.5% reached during the 2001-2002 recession. "The wholesale dumping of space is over, and at some point we're going back to realizing we live in a space-constrained city," he said.
Van Buren, who noted that there was actually more negative absorption of office space in the previous recession, predicted that the availability rate would peak at 14% to 15% this time around. He said that even as asking rents continue to inch downward, initial taking rents as a percentage of asking rates have started to climb again to 83% after bottoming out in July at 76%.
"Business cycles come and go," said Stephen Siegel, CBRE's chairman of global brokerage, who also presented at Wednesday's New York breakfast. "This one had one of the most precipitous drops," but accordingly will go back up "like a shooting star." When the recovery does begin, he added, it will be from a higher starting point than the troughs reached in the early 1990s.
Nationally, CBRE-EA said the industrial availability rate increased 40 bps to 13.9% in Q4, marking the ninth consecutive quarter of rising availability. While 43 of 60 markets measured by CBRE-EA showed rising availability during the quarter, that was "considerably fewer" than in Q3, when 56 markets reported higher availabilities.
In the retail sector, the availability rate rose to 12.5% in Q4, marking the third consecutive quarter of declining increases. CBRE-EA chalks up the smaller Q4 increase to "growing optimism in the economy and consumers' willingness to return to necessities spending, if at a cautious pace," and adds, "signs continue to point toward recovery."
CBRE-EA says preliminary data point toward a steady vacancy rate in the multifamily sector nationwide during the year's final quarter, holding steady at 7.4% for two consecutive quarters. "Vacancy usually rises at year end due to seasonal factors, and the absence of such an increase last quarter indicates that the big rent discounts and concessions reported earlier in the year by established apartment communities are having their intended positive effect on demand," according to CBRE-EA.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
