Office vacancies rise 13% nationwide in fourth quarter

Real Estate Weekly, Feb 20, 2002 by Parke Chapman

2001 saw the biggest jump in office vacancies ever recorded, while the apartment and retail sectors also declined substantially.

The report, featured in the Wall Street Journal last week, was based on a survey conducted by Boston-based firm Torto Wheaton Research.

Office vacancies rose to 13.5% in the fourth quarter in the nation's 72 largest markets from 8.3% the year before. That increase is larger than the previous worst rise on record--1983. That year, office vacancies rose 4.3 percentage points to 13.3% at the end of a building glut.

Waves of corporate layoffs over the past few months have limited the amount of space needed by firms, inundating the sublease market with space.

Torto Wheaton research predicts that office vacancy rates will climb to 14.2% before leveling off. The Wall Street Journal reported that the historical average rate for office vacancies is approximately 12%.

Data from Cushman & Wakefield sets the national commercial vacancy rate in CBD's as 12%, 1.3% lower than Torto Research's figure.

"This is the highest the vacancy rate has been since 1997. But you have to remember that we enjoyed very low vacancy rates over the past few years," said Maria Sicola, Cushman & Wakefield's managing director of research.

She predicted that this year will be "difficult" for the commercial markets across the nation. The good news, said Sicola, is that economists are saying that the recession is coming to an end.