Vacancy Rate Increases, Asking Lease Rate Declines
MARKET OVERVIEW
Currently, the Inland Empire office market is an attractive market for tenants. Rising vacancy rates coupled with decreasing asking rental rates are a natural consequence of the massive building boom that has finally reached its height. This slow and predictable increase in the office supply has been met with a rapid and drastic drop off in demand as mortgage and real estate companies begin to come to terms with the bursting housing bubble.
Developers are responding to the changing market conditions. Projects that were “under-construction” last quarter – land grading started but concrete slabs not poured yet - have been downgraded to proposed and larger projects that have been started are being phased in their development to prevent a glut of new space hitting the market.
Average asking lease rates for Class A space, the newly developed office space, has decreased $0.05 over the previous quarter whereas asking lease rates for older Class B space has remained unchanged.
The spread between Class A and Class B space is narrowing, indicating that landlords in newly developed properties are getting aggressive and are eager to place tenants in their properties. Landlords in older Class B and obsolete Class C space are losing tenants to these newer properties. Tenants in these older buildings are starting to realize that they can afford to move into newer and more functional space, especially given the amount of concessions landlords are willing to negotiate with strong credit tenants.
To View Full Report: Click Here
No comments:
Post a Comment