Office Leasing Update: Glass Half-Full or ?

It would be easy, but also a bit misleading to get excited about the falling vacancy rates for office markets around the country. After all, this unsteady economy can unsettle even the most optimistic broker.

First, the half-full side: Total vacancy nationally fell below 18% (to 17.8%) for the first time in more than two years, according to commercial real estate services firm Jones Lang LaSalle. It was a slight decline from the second quarter, and from the third quarter of last year. (Of course, it’s worth remembering that the vacancy rate fell to 13.8% in 2007.) The energy and tech sectors are driving leasing activity, particularly in Texas, Denver and West Coast markets.

Now, the half-empty take: The leasing gains are coming from deals completed in the latter part of 2010 and the early part of this year, with tenant move-ins now underway. Those deals were made during a relatively more upbeat time for the economy, JLL argues in its most recent office outlook, when 150,000 jobs were being created each month, on average. Needless to say, the summer brought plenty of bad economic news, with debt debates dominating at home and abroad, leading companies to take the old wait-and-see approach. Furthermore, new leasing activity has stalled in the four largest office markets: Manhattan, Washington, D.C., Chicago and Los Angeles.

Using JLL’s data, Developments has produced this map of the 12-month change in vacancy rates in major markets across the country (it’s the percent change in the rates between the fourth quarter of 2010 and the third quarter of this year). All those green arrows are certainly hopeful, but what will it look like in a year from now? (credit wsj, m, strozier)

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