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Foresight: Office market fundamentals continue to weaken
Friday, September 18, 2009
The Tampa Bay area is among the 10 hardest hit metro areas by loss of office jobs in 2009, said a national report.
Tampa was eighth after Phoenix, Detroit, Orlando, Atlanta, Nashville, Los Angeles and Portland, Ore., states the Foresight Analytics LLC report.
Still, the Bay area is not among the 19 cities that are on the Foresight Analytics office market watch list. The Florida cities of Miami and Orlando made the list compiled by the California-based company.
Office market fundamentals have been notably impacted by the recession, as job losses have translated into a need for less office space, said the report. The firm estimates that in 2009 about 1.6 million office jobs will be lost in core office employment sectors of finance, information services, and professional and business services, as well as educational and health services, and government.
The total number of office jobs expected to be lost this year is greatest in New York, Los Angeles, Chicago, Atlanta and Phoenix.
General market softening, swelling sublease availability and owners willing to cut deals to boost income and avoid foreclosure of distressed properties are placing downward pressure on rents, said the report by Susan Persin and Matthew Anderson.
As tenants falter and markets soften, income from properties is expected to fall, creating distress for highly leveraged owners who are increasingly unable to meet debt service or refinance because of falling property values, the report said.
Commercial mortgage delinquency rates hit 4.1 percent in the second quarter, up from 1.9 percent in year-ago period.
The national office vacancy rate of 16.2 percent at mid-year is expected to increase about 300 basis points to 18.4 percent by year end.
By late 2010, renewed job growth and business expansion will lead to positive absorption. Stronger vacancy rates and rent improvement are expected in 2011.
A number of lenders are extending maturing loans in the hope that markets will strengthen, the report said.
"We believe that short-term loan extensions are pushing the problems out and will boost the volume of still-distressed loans maturing in 2010 and 2011, potentially resulting in several additional years of office value depreciation," states the report.
