Thursday, July 26, 2007

Rents up 12%; vacancies down. Good news for (some) downtown landlords

Cushman & Wakefield is reporting that office rents in the second quarter of 2007 are up 12% compared to the same period in 2006, with vacancies at a seven-year low. Apparently, and not shockingly, New York and San Francisco are leading the way. We also know that downtown Chicago is doing well, too. So be happy if you own a building there.

I'm not trying to be Mr. Pessimist, but, just like all politics is local, so is real estate. What about suburban rents? Some are well, and others not. Some markets may be slow for a long time. Note the following from Bloomberg's story: "The country's highest office vacancy rates in the second quarter were in Dallas, at 29 percent, and Atlanta, at 24.6 percent. Rents in Dallas rose 5.2 percent, and in Atlanta they dropped 1.4 percent. Both cities are feeling the effects of development booms from the past several years...."

So, if you bet right and bought in those markets where land is scarce and demand high (and what in the US is more scarce than NY or SF?), you are a big winner. But don't take this report to mean that the picture is rosy everywhere. But the news is at least, at the end of the day, good overall.