National office market rents rose and vacancies slipped in the fourth quarter, the first such improvements for landlords since 2008 and a sign that the market may be rebounding, according to real estate research firm Reis Inc.

"The magnitude isn’t overwhelming," said Reis economist Ryan Severino. "It’s nothing I would start shaking the pom-poms about. But just the fact that they’re positive is welcome news at this point."

Asking rent nationwide ticked up 0.1 percent in the fourth quarter from the third to $27.53 per square foot, according to Reis’ preliminary findings. It was the first increase since the third quarter of 2008.

Factoring months of free rent and other perks, effective rent rose 0.2 percent from the prior quarter, the first rise since second quarter 2008, Reis said.

The vacancy rate, which reached a 17-year high in the third quarter, slipped by a minute 0.04 percentage point to 17.57 percent in the fourth quarter, as 2.5 million more square feet were occupied than were vacated or came onto the market vacant. It was the first time in three years that more space was occupied than vacated.
Real estate demand typically lags an economic recovery. Although the nation’s economy has expanded for five straight quarters, companies have been reluctant to hire, and unemployment remains stuck near 10 percent.

The stubborn unemployment level could mute a recovery, Severino said, but he was still encouraged by the latest data.

"It certainly intimates that we’ve gotten to a stabilization point, and we should look forward to a recovery," he said. "When I look across the board, I’m being cautiously optimistic. There isn’t really anything about the picture that is mixed."

That would be a boost for office landlords, such as Boston Properties Inc., Vornado Realty Trust, SL Green Realty Corp. and Brookfield Properties Corp.

During the fourth quarter, only 2.3 million square feet of new office space nationwide came onto the market, the lowest amount since Reis began collecting quarterly data in 1999. It signaled that lenders were reluctant to make loans for new construction in a weak market, Severino said.

Rents in New York, the nation’s largest office market, rose for a second consecutive quarter, up 1.5 percent in the fourth quarter to $44.35 per square foot. The vacancy rate fell 0.2 percentage points to 11.4 percent.

Washington, D.C. remained the tightest market with a vacancy rate of 9.9 percent, flat with the third quarter.
Detroit continued as the weakest market with a vacancy rate of 26.9 percent, up 0.2 percentage points from the third quarter. (Reuters)