Office leasing markets across North America endured another sluggish quarter with rising vacancy levels and falling rents. With the U.S. economy still contracting and experiencing sizable monthly job losses, many businesses were only interested in shedding space, not taking on more. This was reflected in all most all regions of the U.S. with the vast majorities of cities surveyed posting higher vacancy levels. For the sixth consecutive quarter tenants tenants returned more space to the market than they leased, helping push the national vacancy rate up for the seventh consecutive three month period.
A modest supply of office development also came on the market during the second quarter, again helping to put upward pressure on trhe national vacancy rate. Rents moved downward as landlords competed for tenants in an attempt to keep occupancies from declining further. This was more apparent in downtown markets but suburban rents moved lower. While the economy is showing signs of stabilizing, the outlook for the office market is not encouraging with little chance of new hiring well into 2010. With business conditions still fragile, the office leasing market will remain extremely weak for the balance of 2009 and much of 2010.
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