NY's rents still amongst world's highest

Real Estate Weekly, August 25, 1993

Amsterdam, with a vacancy rate of 35.3 percent, faces the highest vacancy rate in the world, and London, with an average total rent of $93 per square foot, boasts the world's highest rent, according to the ONCOR International "Mid-Year Office Market Data Report", which surveys 61 markets around the world.

In the United States (central business districts), Dallas faces the highest office vacancy rate (30.2 percent), followed by Palm Beach (28.8 percent), White Plains (27.5 percent), Houston (26 percent) and Stamford (23 percent). New York City, which has a vacancy rate of 18. 1 percent still boasts the most available space: 57.6 million square feet. Tallahassee (6.8 percent) boasts the lowest vacancy rate, followed by Portland (13.9 percent), Kansas City (14.3 percent), San Francisco (14.5 percent) and Washington, D.C. (14.6 percent).

Toronto, with a vacancy rate of 24 percent, faces the highest rate in Canada; London, at 18.6 percent, has the highest rate in the United Kingdom; and Amsterdain, at 35 percent, charts the highest rate in Western Europe.

While vacancy rates remain high in many markets, we project decreases or stabilization in just about every one," said Stephen H. Jaggard, president and chief executive officer of ONCOR International, the Houston-based organization of top-ranked commercial real estate firms. "At the same time we forecast stabilization in rental rates, an important indicator which we have seen decrease substantially over the past two years."

ONCOR International's review of rental rates charts "total rent," including electric, taxes and other operating costs. On this basis, London boasts the highest total rents in the world at $93 per square foot. In Western Europe, Frankfurt ($47.72) ranks at the top. Toronto ($35) ranks first in Canada.

In the "Class A' office markets around the United States, New York -- with the highest occupancy costs ($17 per square foot) -boasts the highest rent per square foot at $46.10, followed by White Plains ($34.25), Chicago ($31.03), Washington, D.C. ($28), and Boston ($27). Fort Meyers ($11), Denver ($12.25) and Phoenix ($12.78) boast the least expensive office space in the United States.

In an important indicator of market vitality, ONCOR International's "Mid-Year Market Data Report" shows that Atlanta has experienced the most "absorption" of commercial space. In the first six months of 1993, more than 2 million square feet of space was absorbed in Atlanta. Conversely, the Los Angeles office market experienced negative 3.2 million square feet of absorption (more space was added/-returned to the market than was leased). Most U.S. cities experienced positive absorption, meaning the existing stock of space is being used up in most markets.

For example, 6.7 million square feet of space was leased during the first six months of 1993, yet just 757,000 square feet was absorbed. Nonetheless, this is an improvement over the negative net absorption figures charted in past years.

Just 16 out of the 43 U.S. cities charted have new construction projects under way, including Washington, D.C., Newark, Colorado Springs, Miami and Kansas City. In Western Europe, where availability rates are extremely low,, some major projects have begun, including more than 10 million square feet worth of commercial projects in Berlin alone.

"It is important to recognize that real estate is a very local business, so it is important to command a strong understanding of each individual market, Jaggard said. "Yet at the same time, it is interesting to view each market in an international context.'

The ONCOR International "Market Data Report" surveys 61 markets (43 American, 2 Canadian and 16 European) twice a year to compile the most comprehensive international market survey. ONCOR International is an organization of top-ranked independent commercial real estate firms dedicated to serving clients with needs in multiple locations. The ONCOR system provides in-depth knowledge of more than 180 markets - coordinated and delivered, with single-source accountability.