1Q 2009 – Commercial Rental Rates Continue Downward

U.S. office rents declined at the steepest rate in seven years during the first quarter of 2009, according to research firm Reis Inc.

“It’s really sobering to see that even though we’re technically at the beginning of this downturn, the magnitudes of the declines, the fact that they’re registering historic levels, is really sobering,” says Victor Calanog, Reis director of research.

So far, commercial property values have decreased 22 percent from their peak in 2007, according to J.P. Morgan. Nationwide, rents, minus discounts to tenants, have fallen 3.2 percent, compared to the first quarter of 2008. The vacancy rate rose 15.2 percent in the first quarter.

Reis predicts that surplus space will reach 47.7 million square feet by the end of 2009, but some commercial property experts are saying that number is too low. Many economists expect a recovery in this sector by early 2010.

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