Empty office space at 16-year high
TEXT OF INTERVIEW
Bill Radke: One sign the economic recovery still has a long way to go: empty office space. A new report says office vacancies are at their highest level in 16 years. Marketplace’s Amy Scott is with us live from our New York bureau. Hi, Amy.
Amy Scott: Hi there.
Radke: How much empty space is that?
Scott: Well we’re talking about more than 11 million square feet that opened up just during the first quarter of this year. So that’s roughly the equivalent of about four Empire State Buildings. According to the real estate research firm Reis Inc., the U.S. office vacancy rate is 17.2 percent, which is the highest since 1994.
Radke: But we had that positive unemployment report on Friday with signs employers are hiring. Could that help office space start to fill up?
Scott: Right, well commercial real estate lags behind the labor market, so this report says it could be another year to a year and a half after the job market stabilizes before we see a real pick-up in office leasing. And some other news out today doesn’t bode very well for the commercial real estate market. The Wall Street Journal reports that the number of companies filing for bankruptcy jumped 20 percent last month from the month before.
Radke: And what is that doing to office rents? I would think with all that empty space, there’d be some pretty good deals.
Scott: That’s the good news for startups and businesses that want to expand. When you throw in incentives that landlords are offering, commercial rents are down more than 7 percent from a year ago. And this report says that while rents are still falling, they are starting to stabilize a bit. So Reis is expecting, and I quote: “less of a bloodbath” this year.
Radke: Wow, less of a bloodbath. That’s something, anyway. Marketplace’s Amy Scott, thank you.
Scott: You’re welcome.
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