10-6-10 Signs of Recovery For Office Market :: The Construction Management Pro

10-6-10 Signs of Recovery For Office Market

By ANTON TROIANOVSKI

In a sign that the country’s commercial real-estate market is finally turning the corner, new statistics show that office rents that have been falling throughout the economic downturn are beginning to stabilize.

The industry’s recovery is likely to be a slow one. Many businesses are continuing to give up office space as new hiring stays sluggish, the timing of the economy’s recovery remains uncertain and companies figure out how to fit more workers into less space.

Bloomberg NewsStatistics show office rents that had been falling in the economic downturn, such as those in Midtown Manhattan, are beginning to stabilize.

Investors are taking action. In the latest deal, publicly traded landlord Boston Properties Inc., run by real-estate and media mogul Mortimer Zuckerman, on Monday said it would buy Boston’s tallest skyscraper, the John Hancock Tower, for $930 million.

Commercial real estate, an enormous sector with some $1.4 trillion of debt coming due by the end of 2014, has been closely watched by regulators and financial companies because it could act as an anchor on the economy as it struggles to recover. For months the news has been bad, with declining rents and rising vacancies pushing more properties into default, foreclosure and bankruptcy. Thousands of landlords are struggling with properties valued at less than their mortgages, like millions of “underwater” homeowners.

The pressure on rents now seems to be easing. Average effective rents—taking into account concessions such as a few months of free rent—for some 4 billion square feet of office space tracked by research firm Reis Inc. fell by just a penny in the last three months, the smallest quarterly decline since 2008. At $22.05 per square foot per year, effective rents are 12% below the 2008 high of $25.07.

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