Office Market Nears Rent Growth Tipping Point

Positive Absorption, Vacancy Trends Hold Up Despite Soft Patch In Economic Recovery
by Costar

The rebound in office-using jobs is spreading to smaller businesses, which dominated office leasing activity during the first quarter of 2012. The continued positive absorption, coupled with dwindling supply of available space, is setting the stage for resumed rent growth in U.S. markets over the next few years, CoStar Group reported this week in its First-Quarter 2012 Office Review & Outlook.

Though weaker than in recent quarters, office space absorption in the U.S. held steady at 11 million square feet in the first quarter while the national office vacancy rate fell 10 basis points to 12.7%, according to the report presented to CoStar clients by Walter Page, director of research for Property and Portfolio Research (PPR), CoStar’s analytics and forecasting division, and Jay Spivey, CoStar senior director of research and analytics.

While overall job growth has been less than expected, the economy is converting the number of temporary jobs to permanent fulltime jobs at a faster clip and employees are working a greater number of hours on average, trends that bode well for office demand and rent growth over the next three years, the CoStar economists reported. If job forecasts hold up, the unemployment rate will fall to its long-term of average of below 6% by 2015.

For the first time in several years, none of the top 20 U.S. office markets reported job losses, with hiring especially strong in energy markets such as Houston and Dallas/Fort Worth, and technology markets such as San Francisco, San Jose and Denver.

Meanwhile, rising energy prices are causing a parallel increase in construction costs. This trend, combined with higher interest rates required to support new office construction, will likely curtail the level of new supply until rents begin to justify new supply, buying more time for vacancies to decline further, Page said.

The 11 million square feet in total absorption, while comparable with historical average, declined over the last couple of quarters and remains far below levels from the mid-2000s, when 30 million to 40 million square feet per quarter in office space absorption was routine. Despite solid job growth, office landlords and their tenants continue to hold a large amount of so-called shadow space, unused but not officially listed as vacant.

Gross leasing activity, the type of metric broker commissions are based on, is projected to be nearly 120 million square feet in the first quarter.

“Rents have come down, space is cheap relative to history, and companies are taking advantage of that to move, upgrade or expand into new space, and we’ve seen steep increases from the bottom of the market in 2009,” Spivey said. “These leasing levels rival what we saw in the 2000 dot-com period.”

Leasing is now dominated by smaller tenants, with over 50% of transactions involving blocks of space measuring 2,000 square feet or less in 2011. At the same time, large tenants are very rare in the market, with transactions over 50,000 square feet representing less than 1% of total activity, according to new data generated by PPR and CoStar.

“Roughly half of the tenants in the CoStar database occupy between 2,000 square feet and 20,000 square feet, and that’s the sweet spot of liquidity within the office sector,” Page said.

Tenants are also becoming more efficient in their real estate usage, with footprints on new leases down 6% over the last 10 years. While Class A tenants have seen a modest 3% increase in square footage, the amount of Class B space taken is down by 5% and Class C space down 13%.

CoStar and PPR project the national vacancy to decline to 10.5% by the end of 2015, with the corresponding increase in occupancy leading to boosts in NOI, rent growth and other factors that tend to boost property values. Meanwhile, the supply pipeline will remain at low ebb until 2015, and occupancies should continue to rise ever in the event of a spike in energy prices or a meltdown in the European economy.

Tenants, finding a scarce supply of Class A property, are starting to gravitate to Class B buildings, and smaller tenants are back in the market — both indications of a broadening of the recovery that’s helping more employers hire more workers.

For the Greater Reading Office Market Report – Click Here

Source: Costar



For More Information about Local News, Market Intel, or Commercial Real Estate Opportunities; visit

Bryan E. Cole | NAI Keystone Commercial & Industrial, LLC

direct: 610-370-8502  |  Check out my new website at

About Bryan Cole and NAI Keystone

Bryan joined NAI Keystone in early 2004, but before joining NAI, Bryan Cole spent 4 year’s active duty in the United States Marine Corp, including a 6 month deployment in Afghanistan, a 4 month deployment in Kuwait/Iraq, and a 7 month deployment in Japan. Prior to joining the military Bryan was involved in the construction of commercial and multi-unit properties in the Philadelphia suburbs. Bryan has experience working with a diverse group of individuals in numerous countries throughout the world. During Bryan’s time at NAI, he has sold and leased well over $230 Million Dollars worth of Commercial Real Estate. Because of this, Bryan earned NAI gold club status his first year in the business. Bryan is currently working on earning both his CCIM designation and SIOR designation. Bryan has been NAI Keystone’s Top Performer since 2006. 
NAI Keystone is a full service commercial and industrial real estate firm located in Reading, Berks County.  NAI Keystone manages and handles approximately 4 Million square feet of commercial and industrial space in Berks and Schuylkill County.  NAI is the only firm in Berks County dedicated to strictly commercial real estate.
610 779 1400 (o) | 610 779 1985 (f) | 3970 Perkiomen Ave, Suite 200, Reading PA 19606

Keystone Innovation Zone and Keystone Opportunity Zone

Two Zones that offer incentives are KIZ and KOZ’s.  Please see below for the basic definitions of these two zones.  There are numerous economic development groups that can assist in submitting a proposal to the state along with NAI who can assist in locating property within one of these zones. 
What are Keystone Innovation Zones?
Keystone Innovation Zones (KIZs) are designated zones that may be established in communities that host institutions of higher education – colleges, universities, and associate degree technical schools. These zones are designed to foster innovation and create entrepreneurial opportunities. They do this by gathering and aligning the combined resources of educational institutions, private businesses, business support organizations, commercial lending institutions, venture capital networks (including angel investors), and foundations (KIZ partners) In other words, where a partnership of these organizations is formed, a KIZ is possible.
For Detailed Information about KIZ: (Interactive Brochure)
What are the basic benefits of operating KOZ?
Businesses making purchases of items subject to Sales and Use Tax – other than motor vehicles and certain real property – will be exempt from state and local Sales and Use Tax on specific materials utilized in a zone or expansion zone. Businesses will also enjoy tax reductions, exemptions, abatements, or credits in corporate taxes, franchise taxes, financial institution taxes, income taxes, and real estate taxes.
For Detailed Information about KOZ: (Interactive Brochure)
Check with NAI Keystone’s Bryan Cole to assist in finding sites within these zones and to get information on correct economic development and state contacts. 

For More Information about Local News, Market Intel, or Commercial Real Estate Opportunities.  visit

Bryan E. Cole | Team Leader
NAI Keystone Commercial & Industrial, LLC
direct: 610-370-8502

Check out my new website at

NAI Keystone is a full service commercial and industrial real estate firm located in Reading PA; We handle buyer, tenant, and landlord representation throughout Pennsylvania and with the association of our global partners we can assist in locating product throughout the country.

New File uploaded to DocStoc

411 S Claude A Lord Blvd

NAI Keystone’s Bryan Cole and John Buccinno are named Exclusively brokers for 411 Claude A Lord Blvd Pottsville Pa 17901 Location 411 Claude A Lord Blvd

For more information about this property.  Please contact.

Bryan E. Cole | Team Leader
NAI Keystone Commercial & Industrial, LLC
direct: 610-370-8502
Check out my new website at

NAI Keystone Commercial and Industrial, LLC releases November 2009 Newsletter

NAI Keystone’s Bryan Cole and John Buccinno publisher of The Greater Reading Commercial & Industrial Real Estate Newsletter publish Novembers edition.  NAI Keystone representing a large market share of commercial and industrial real estate in berks county.  For more information please contact Bryan E. Cole or John Buccinno of NAI Keystone at 610 370 8502 ; or


Newsletter Link is –—Bryan-Cole-Novembers-Greater-Reading-Commercial-Real-Estate-Newsletter


Temple Plaza

NAI Keystone’s Bryan Cole and John Buccinno are named exclusive leasing reps for Temple Plaza.  The site is a retail strip center located along busy route 422/5th street hwy.  The site is ideally suited for retail or office users.  High traffic volumes, and visibility make this site a prime facility.  For more information contact Bryan Cole or John Buccinno at 610 370 8502 ;; or

Sale of REO Property in Douglassville

NAI Keystone’s Bryan Cole and John Buccinno handled the sale of 1.6 Acre lot in Douglassville.  The site was taken back by the bank as part of a bankruptcy.  NAI Keystone was given the assignment by the Bank to dispose of the property.  NAI had the property under contract within 3 months of listing the site, and sold the property at a competitive number while getting a quick and favorable deal for the bank with a raw piece of dirt.  The site was owned by Park Avenue Funding in New York which is a subsidiary of The Lightstone Group.