New York, NY, Apr. 6--The nation's office-vacancy rate declined in the first quarter for the first time in more than three years, as companies added slightly to their payrolls in the period and fewer new buildings came onto the market.
Still, the nation's apartment market continued to struggle, with the average vacancy rate rising to its highest level in 17 years because of low mortgage rates luring would-be renters into buying homes and too much construction in some markets.
The amount of occupied office space in the U.S. rose for a second straight quarter, helping to drive down the vacancy rate to 16.8% from 16.9% in the fourth quarter of 2003, according to the survey of the top 58 U.S. metropolitan markets by Reis Inc., a real-estate research firm based in New York. In the year-earlier first quarter, the vacancy rate was 16.3%.
The survey, to be released today, comes days after the Labor Department reported that employers added 308,000 new nonfarm jobs in March, the strongest jobs report in almost four years.
If employment growth is sustained, companies will need to occupy more space to house their workers, and the office market will recover, said Jim Sullivan, an analyst with Green Street Advisors Inc., a Newport Beach, CA real-estate stock-research concern. "We should start to see some better trends, but it's still tough out there," he said. "We're working from a very deep hole in a lot of markets."
The lower office-vacancy rate was helped by new building completions, which were at their lowest number in at least five years as building activity has decreased in recent years. Rents declined for a 12th straight quarter, falling 0.7% to $20.41 a square foot from $20.55 in the fourth quarter of 2003.
The national office-vacancy rate hit a low of 7.5% in the third quarter of 2000 and had risen every quarter until the most recent period. Office-space absorption--or the change in net amount of occupied space--had never been negative before the 2001 recession. After that, it was negative for 11 of 12 quarters until the past six months, when it returned to positive levels. In the first quarter, companies absorbed 1.49 million square feet, down from 4.38 million square feet in the fourth quarter but much better than the negative 4.79 million square feet in the year-earlier first quarter.
