The vacancy rate in the US for office space rose another 0.5 percent in this third quarter. It is now at 16.5%. This is a five year high, according to many research firms.
Not only are the spaces vacant, rents have fallen 2.2% from last quarter. Average price is $22.91 per square foot. This price is an 8.5% drop from third quarter last year.
Out of 79 markets, rent has fallen in 68 of them. Most hard hit are San Diego, Seattle, Boston, San Jose, Orange County and San Francisco. In these markets a decrease in rent has been in the double digits over this past year.
Even in New York, the largest U.S. office market, the vacancy rate rose 0.6% to 11.4% with rents falling to an an average of $47.16 per square foot -- a 4.4% decline.
Further declines are likely nationwide, said Victor Calanog, Reis director of research.
"At some point they will need to lower asking rents significantly in order to bring prospective tenants in the door, even before talks about concessions are initiated," Calanog said. "We have yet to observe clear, systematic evidence that the office market is bottoming out and has begun to recover."
Many of these office spaces will face foreclosure or need to be part of a short sale. Otherwise these properties are likely to face forclosure.
The commercial foreclosure/short sale market is clearly the next pin to fall