By Victor Calanog
VICE PRESIDENT OF RESEARCH AND ECONOMICS, REIS INC.
a promising firs T half for office proper Ties
It finally looks like the U.S. office market has bottomed and is beginning a slow recovery. After
increasing for three straight years, vacancies began to decline for the office sector in the first
half of 2011, ending at 17. 5 percent in the second quarter. Occupied stock also improved, with
the market absorbing 9. 4 million square feet in the first half.
To be fair, second-quarter absorption figures of
3. 9 million square feet were
markedly slower than the
first quarter’s 5. 5 million
square feet. This slowdown
largely reflected changes
that are taking place in
the overall economy. Real
(GDP) growth slowed in the
first quarter after accelerating for two consecutive
quarters. Moreover, labor-market data from the Bureau of Labor Statistics has
shown a slowdown in hiring in May and June after briefly accelerating earlier this year. This inevitably affected the pace at which employers chose to lease new office space.
Source: Reis Inc.
OFFICE NE T ABSORp TION AND VACANCy
Asking and effective rents increased by 0.3 percent and 0.4 percent, respectively. Asking rents
had been declining since peaking in the third quarter of 2008, while effective rents had been
declining since peaking in the second quarter of 2008, before beginning to increase in fourth-quarter 2010. The rate of increase decelerated versus the first quarter, however, as asking
and effective rents increased at a slower pace than the previous quarter, when they each increased by about 0.5 percent.
Nonetheless, the asking-rent increase continues to be a positive development and demonstrates that, despite recent changes in the economy, landlords remain confident enough about
their prospects to move beyond adjusting concessions and continue to increase face-level asking rents, albeit slightly. Effective rents are generally keeping pace with asking rents, indicating
little, if any, change in concessions. Although we expect the economy and labor markets to continue to improve and have
not altered our outlook for
the office market, recent
developments in the economy are a stark reminder
that this will be a protracted
and inconsistent recovery
for the office market.
12-MONTH CHANgE IN EMpLOyMENT
The most disconcerting development that may change
the outlook for the near-term fate of the office market is the slowdown in GDP
and employment growth in
the first six months of the
year. We started 2011 with
GDP growth projections between 3. 5 percent and 4 percent; the Federal Reserve eventually lowered that to 3.1 percent to 3. 3 percent, and its latest numbers put GDP growth at less than 3
percent for the year. Average monthly job growth of 200,000 or more was common among forecasters earlier in the year, but with only 18,000 jobs created in June, pundits are scrambling to
readjust their predictions.
Source: Bureau of Labor Statistics
We remain cautiously optimistic about the recovery in the economy and in the office market.
We expect vacancies to trend downward slowly, reaching the low 17s by the end of 2011. This
has been our forecast since early 2010. The good news is that we do appear to be emerging
from the cyclical bottom; it is just not as fast a recovery as we would hope.
Victor Calanog, vice president of research and economics at Reis Inc. ( reisreports.com), writes a monthly column
on property types for Scotsman Guide. He and his team of economists are responsible for data models, forecasting, valuation and portfolio services for clients in commercial real estate. Reach him at firstname.lastname@example.org.
Faruk Ozdemir, associate director for research at Reis, contributed to this article.
Collete English Dixon 2011 PRESIDENT COMMERCIAL REAL ESTATE WOMEN NET WORK
BY JENNIFER E. GARRETT
Promoting women in the commercial real estate industry is the Commercial Real Estate Women (CRE W)
Net work’s mission. In 2005, CRE W Net work released
a benchmark study of women in commercial real
estate and followed it up in 2010. This month, the
organization holds its annual convention and marketplace, and 2011 president Collete English Dixon
gives us a look at what’s in store for the conference
and what’s ahead for CREW Network.
What will the convention focus on this year?
The market has picked up. Transactions have picked
up on the leasing and the buy-sell side. It’s time to
get charged up about getting back to work. We’re
talking about regaining our excitement for the industry and understanding the opportunities and the
challenges that we have to deal with as the industry
goes through this restart.
What have the benchmark studies revealed?
The [first study] showed that women had some good
positions but were lagging in compensation and
advancement. In 2010, our five-year update found
some interesting disparities between how women
were faring in the industry versus men. There had
been some progress made, but women still have
challenges advancing beyond the [vice president]
level with equal compensation for equal tenure and
equal work. This information will help us springboard into some new initiatives that will hopefully
help us support the further advancement of women.
What new programs are you working on?
We’re partnering with Cassidy Turley to pilot a new
executive-level mentoring program this year called
“Bridging the C-Suite Gap.” It will be officially kicked
off at the convention. There are certain mentorship
and sponsorship needs that women must fill to ascend. They also need to develop certain professional
and leadership skills.
What role does education play in CREW Network?
We have certain programs in leadership and professional development that allow our members to stay
on top of trends and to understand what’s going
on in the industry. Our Leadership Series focuses
on leadership-skill development. You can’t move
up and you can’t succeed unless you have a good
sense of how to be a leader.
What’s important to know in commercial real
You need to be aware of the trends. You need to be
aware of what’s happening in a broader, more global
sense in the industry so you can better prepare yourself or your client to deal with those things. It’s always
important to continue to learn about what’s going on
in your specific discipline and outside of it so you can
have a holistic view and hopefully do the best job that
you can for yourself, your company and your client.
Jennifer E. Garrett is an associate editor at Scotsman Guide.
Reach her at (800) 297-6061 or email@example.com.