The U.S. office market ended the third quarter of 2009 with a vacancy rate of 13%. The vacancy rate was up 40 basis points from the previous quarter of 12.6%.
CoStar Group tracks both available and vacant space and the discrepancy between the two has been growing increasingly wider since 2006. At the start of 2006, there was an approximately 100 basis point spread between the two. Today, that spread is more than 330 basis points with the total availability of office space now hitting 16.3% in the major U.S. office markets.
Net absorption year-to-date has totaled a negative 48.2 million square feet. Of the 63 major office markets for which CoStar publishes a quarterly market report, 38 recorded negative net absorption during the third quarter — that was four fewer than in the previous quarter.
Net absorption in the central business districts was a negative 3.9 million square feet in the third quarter 2009. That compares to a negative 3.5 million in the second quarter 2009, and a negative 10.4 million in the first quarter 2009.
Net absorption for the suburban markets was a negative 10.8 million square feet in the third quarter 2009. That compares to negative 8.2 million in second quarter 2009 and a negative 11.4 million. The overall vacancy rate in U.S.’s central business district at the end of the third quarter 2009 increased to 11.1% up from 10.7% in the previous quarter. The vacancy rate in the suburban markets increased to 13.6% in the third quarter up from 13.2% in the second quarter.
The quarter was not stellar for many markets, but a handful of markets consistently showed up at or near the bottom on number of indicators this past quarters. The consistently worst performing markets were as follows.
Palm Beach County, FL, had one of the highest vacancy rates in the country at 17.8%; the availability rate was 21.1% (that was 240 basis points higher than in the previous quarter); net absorption was a negative 477,000 square feet, compared to positive absorption in the previous quarter.
Greenville/Spartanburg, SC, posted a vacancy rate of 12% and while that was lower than the national average, it was up significantly from 10.8% in the previous quarter. Its total availability rate jumped from 13.9% to 15.2%. Net absorption was a negative 182,000 square feet compared to positive net absorption in the previous quarter.
Detroit continued to suffer from weakness in the U.S. automotive sector. Detroit’s continued rise in vacancy and availability showed no signs of tapering off in the third quarter. Its vacancy rate stood at 17.3% and availability was 22.1%.
Birmingham, AL, showed significant jumps in vacancy, availability and declines in net absorption. Its vacancy rate jumped from 10% to 11% and availability jumped to 13.6% from 12.4%.
Jacksonville, FL, with a 15.8% vacancy rate was one of the weakest performing markets of comparable size posting a negative 657,000 square in net absorption and its vacancy rate jumped up from 14.7% because of that.
Three local markets performed relatively well compared to the rest of the country.
San Antonio, TX, posting nearly 570,000 square feet of positive net absorption in the third quarter saw its vacancy rate decrease from 11.6% to 11%. Its availability rate also fell from 13.7% to 13.5%.
Its cross-state neighbor, Austin, also posted positive net absorption of 577,000 square feet and its vacancy rate dropped from 15% to 14.8%. Its availability rate was stable at about 18%.
Richmond, VA, saw its vacancy rate fall to 10% one of the five lowest in the country. The market posted positive net absorption of 168,000 square feet. However, its availability rate jumped up from 12% to 13.2%.