An Analysis by Victor Calanog, PhD
DESPITE PROTECTION FROM LONG-TERM LEASES, OFFICE FUNDAMENTALS BEGIN TO SLIP
The national office vacancy rate rose by 10 basis points in the second quarter, ending the period at 17.1%. Construction slowed significantly, with only 3.3 million SF of office space coming to market (as compared to a quarterly average of 11.8 million SF in 2019. Asking rents fell by 0.1% and effective rents fell by 0.4% in the second quarter – asking and effective rents had actually risen by 0.4% in the first quarter just before the COVID-19 pandemic became widespread.
Evidently this was the office sector’s last hurrah before succumbing to economic distress…
Victor Calanog, PhD CRE® is the Head of Commercial Real Estate Economics at Moody’s Analytics REIS. He and his team of economists and analysts are responsible for the firm’s market forecasting, valuation, and real estate portfolio analytics services. He holds a PhD in Applied Economics and Management Science, trained by a dissertation committee composed of faculty from the Wharton School of the University of Pennsylvania and Harvard Business School.