The State of California left leased office space vacant for four years, costing the tax payer a whopping $580,000 . State Auditor Elaine Howle has been investigating whistle-blower allegations over the last six months. She has uncovered the wasting of state funds, improper payments, and misappropriation of state funds. She has also written to State Gov. Arnold Schwarzenegger. The office space which totaled $580,000 in San Diego was used for the Department of Corrections and Rehabilitation for four years from 2004 to 2008 but was never actually utilised. This was down to poor communication and bureaucratic failings.
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The office market in Houston is looking like it will have a very depressing year with spiraling job losses and empty office buildings. In fact there could be as much as one million square feet of negative absorption. It is argued that the office market in Houston has not had a year as bad as this since the collapse on Enron. In quarter one of 2009 there was 367,000 square feet of negative absorption. There is also over one million square feet of sublease space on the market, which is bringing down the average rental; value. It has increased 12.4% from Q4 2008 and is now at the highest rate since 2005.
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As commercial property experts had been predicting the vacancy rate across Fairfield County rose to 12% in Q1 of 2009. There have also been steep increases in Stamford and Greenwich. Across the county, 16.8 percent of the total 44 million square feet of stock was on the market (lease or sublease), and this was up from a figure of 15% at the end of 2008.
Around 21.5 percent of Stamford’s 15 million square feet of office space was on the market in Q1 of this year, which is up from the figure of 17% for a year ago. At the back end of 2008 it was 17.9%, showing just how badly the market has become since the turn of the year. Even compared to the rest of the US, having one fifth of all buildings vacant is an alarming figure for landlords and agents.
Stamford’s vacancies are being caused by financial companies downsizing, that’s the view of commercial property agents in the area. In total, major financial corporations in the area have collectively put on over 832,000 square feet of office space back onto the market. Despite the challenging conditions, many leases are due to expire soon, which means companies will stay in the vicinity, but perhaps at a lower rental value than what was agreed before.
Beltline in Calgary is the only part of the office market in the city to have experienced positive net absorption according to local property experts. There are three buildings in the pipeline, and are in total 92% pre let. Office space in this part of the city totals 5.5 million sq ft. With cheaper rents than the downtown areas and with better parking ratio’s, the beltline is becoming highly popular with local businesses. We have seen this pattern across many US cities, where the less prestigious area’s have flourished as the economy falters.
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According to real estate experts there is a plethora of sublease office space on the US market. There could be as much as 10 million square feet of total sublease space available. And it is no surprise that the cities with the highest volume such as New York, 
Chicago, San Francisco, Denver and Boston, are the ones where financial institutions are contracting.
Even though 10 million sq ft is a huge amount, the main figure may be even higher than this. Considering the amount of companies who have been making redundancies, there is most probably lots of empty space where businesses have not have the time to make efforts to get it sublet.
If you are one of those companies with empty office space that you want to lease, ensure that you have a contigency in case the sub-lessor defaults. Ensure you pick a reputable commercial property agent to work with, else you could find your whole office evicted if they fail to make payments!
Houstons office space leasing market had a negative net absorption rate of 367,000 sq ft in Q1 of 2009. However, there was a POSITIVE absorption rate for class A office space, which given the current economic climate, was remarkable. The vacancy rate in Houston is just over 12%, which equates to 186.3 million square feet of office space, spread over 1,191 buildings.
One problem for landlords and agents based in Houston is that there was 1.6 million square feet added in Q1 2009 alone, On top of that there is around 4 million sq ft of additional space to come onto the market in Q2 and Q3 of this year. As with the rest of the US, the decline in demand is driven by falling levels of employment – around 50,000 jobs are expected to go in Houston this year. In fact, this is the biggest fall in jobs since the 1980’s
The average asking rent in Houston for class A space is now $31.94 per square foot. For class B the figure is $21.65 per square foot, and for class C is it $15.59. This does not show the whole story of the market though because landlords are offering lots of generous incentives to potential tenants such as rent free periods.
There are only two cities that really are performing well in the LA office space market – Glendale and Burbank. They are the only two to make gains in the last quarter, as the city feels the force of the global economic slowdown. In Q1 2009 there was 2.5 million square feet of space that went onto the market. That was up from 1 million square feet which was the figure for the last quarter of 2008. And to put that into perspective, the figure was around 700,000 square feet in April 2008. However, Glendale and Burbank bucked the trend with more new tenancies than terminations.
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Sublease office space now accounts for 20% of the Canadian rental market as more and more companies downsize their operations. The overall vacancy rate in central business districts (CBD’s) is now nearly 6% in Q1 2009, up from 5.1 per cent in Q4 2008. This is having an adverse effect on demand, with downtown office rents down by 5.8 per cent to $47.50 per sq ft. Many of the companies that are downsizing are subletting space that had been earmarked for expansion.
The Canadian office market is facing the same problems as the US market in that there is torrent of sublease space that is bringing down rents, as well as pushing companies away from taking lets in new space.
The North American office market continued on a downward trajectory, with Q1 2009 being the worst quarter since Q3 2001 according to real estate experts. Vacancies have been rising steadily and set continue to rise into the rest of 2009. One major factor that is certainly contributing to the problem is the amount of sublease space that is coming onto the market. Sublease space rose by 7.5 million sq ft during Q1 and is now 11% of all available space. Within the Manhattan market it is nearly one third of all available space. Sublease space is almost always cheaper than new space and thus drags down the overall rental values.
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As companies empty office space in Downtown Manhattan, there are new schemes being planned. And there is no scheme more prominent than that of the redevelopment of ground zero. The three new planned skyscrapers will consist of 7.57 million sq ft of office space by 2013.
As a consequence the developers are in negotiations again over how and when the new buildings will be constructed. The situation is being made more complicated due to the fact that the utilities and entryways for the nearby $3.2 billion transit center are connected to the base of the site. As well as this, there is the issue of the memorial which is still to be resolved.
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