US Office Market Signals Recovery

Latest statistics reveal that office rents that have shown a downward trend throughout the financial meltdown are starting to stabilize, which indicates that the US commercial real-estate industry is recovering.

However, the market's recovery is expected to be slow. Many companies are still giving up office spaces as the pace of economic recovery remains unpredictable, new recruitment remains sluggish and businesses try to find ways to fit more employees into smaller office spaces.

Commercial real estate, a massive sector with about 1.4 trillion dollars of debt due by the fall of 2014, is being closely monitored by both financial companies and regulators because it can play a vital role in economic recovery. Reports have been disappointing for months, with falling rents and ever increasing vacancies pushing many properties into bankruptcy, foreclosure and default.

The pressure on office rents now appear to be declining. Average rents- taking into consideration concessions like free rent for a few months- for around 4 billion sq ft of commercial space went down by a negligible amount during the last three months, a research by Reis Inc. shows. This is the smallest quarterly fall since 2008.

Some cities showed more improvement than others. For instance, in New York, where commercial rents fell 19% during 2009, they went up by 0.2%, in the latest quarter. The office market in Washington D.C. remained the healthiest in the country with a 9.8% vacancy rate.

However, rents continue to decline in many places severely affected by the housing crisis, including Las Vegas, San Diego and Phoenix.