National leasing levels off but rents continue to rise.According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the just released First Quarter 2007 Studley Report, the national real estate market has experienced an inevitable cool down in leasing activity after the frenzy of leasing that occurred in major metropolitan areas such as New York New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , Washington DC, and San Francisco San Francisco (săn frănsĭs`kō), city (1990 pop. 723,959), coextensive with San Francisco co., W Calif., on the tip of a peninsula between the Pacific Ocean and San Francisco Bay, which are connected by the strait known as the Golden in 2004 and 2005.
Nationally, Class A volume peaked during those years averaging 29.3 million square feet per quarter as compared to 25.1 million square feet since the start of 2006, a drop of 16.5%.
The Studley Report explains the emergence of two major trends that are indicative of growth cycles losing steam: 1) the growing gap in rents between the CBD's and suburbs, as tenants focus more on CBD (Component Based Development) Building applications with components (objects). See component software.
CBD - component based development locations and 2) a slow down of hiring by larger firms in primary markets that were responsible for the initial thrust in absorption to accommodate a ramp up Ramp Up
To increase a company's operations in anticipation of increased demand.
A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product.
See also: Demand, Economies of Scale in headcount.
Some markets and industry segments are expanding however. "As venture capital spending capital spending
Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. recovers, smaller and mid-sized firms, which provide services to the mega-companies like Google and to financial heavyweights such as Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. or defense contractors such as Northrop Grumman Northrop Grumman Corporation (NYSE: NOC) is an aerospace and defense conglomerate that is the result of the 1994 purchase of Grumman by Northrop. The company is the third largest defense contractor for the U.S. and Lockheed Martin For the former company, see .
Lockheed Martin (NYSE: LMT) is a leading multinational aerospace manufacturer and advanced technology company formed in 1995 by the merger of Lockheed Corporation with Martin Marietta. , are leading the expansion now," said Steven Coutts, Studley's senior vice president, national research.
"Landlords in markets where this growth is taking place, like Silicon Valley, assume this growth will continue and are posting incremental increases in asking rents."
The national overall rental rate rose by 4.7% from last quarter to $27.58. Only three markets posted slight quarterly decreases in overall rent--Suburban Maryland (-0.8%), Chicago (-0.4%), and New Jersey (-0.2%).
All other markets recorded increases with the greatest growth occurring in San Francisco (+20.4%), Orange County (+9.3%), Silicon Valley (+8.2%) and San Diego San Diego (săn dēā`gō), city (1990 pop. 1,110,549), seat of San Diego co., S Calif., on San Diego Bay; inc. 1850. San Diego includes the unincorporated communities of La Jolla and Spring Valley. Coronado is across the bay. (+7.4%).
"Landlords are increasing asking rents, particularly for new properties." noted Coutts.
"Even in areas with increased availability, landlords are raising rents, passing on the high cost of new construction and record sales prices to tenants. If larger tenants were to decide to exit the top-tier markets, choosing value over quality and location, their departure could force landlords to reverse the rising rental rate trend."
The national overall availability rate posted at 13.6% at the quarter's end, a decline from 13.8% in the previous quarter. No market posted a dramatic quarterly change in availability, but the rate rose in five markets with only Atlanta (+1.0pp) and Orange County (+l.7pp) reporting increases of greater than one percentage point. Nationally, the Class A availability rate stood at 13.7% as compared to 14.0% in the previous quarter.
Among some of the larger deals transacted last quarter were Lehman Brothers' 425,374-square-foot lease at 1271 Avenue of the Americas in New York City New York City: see New York, city.
New York City
City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. ;
Academy for Educational Development's 336,631-square-foot transaction at 1876 Connecticut Avenue in Washington DC; Babcock & Brown's 155,000-square-foot lease at One Letterman Drive in San Francisco; New Line Cinema's 65,535-square-foot lease at 116 North Robertson in West Hollywood, California West Hollywood, an incorporated city in Los Angeles County, California, was founded on 29 November 1984. The total residential population is just over 37,000; however, the nighttime and weekend population swells to between 80,000 and 100,000, with a high of up to 500,000 during ; Calyon Financial's 51,226-square-foot transaction at 550 West Jackson Boulevard in Chicago; and U.S. General Services Administration's 47,356-square-foot lease at 12445 E. Caley Avenue in Centennial, Colorado.
Cities which reported the most interesting findings this quarter were:
* Silicon Valley, which after years of soft market conditions favoring tenants has become a landlord's market due to decreased availability;
* Orange County which seems to be defying economic logic as asking rents rise dramatically, but demand is weakening and availability on the rise;
* Houston, which is enjoying its greatest boom in two decades, as availability fell for the tenth consecutive quarter, and tenants are competing for space;
* Denver, which mimics Silicon Valley's scenario as the pendulum swings to favor landlords. More than 40% of buildings in the CBD have changed hands, leading landlords to expect higher rents, which have already increased sharply over the last 19 months.
Studley's report covers Atlanta, Chicago, Dallas, Denver, South Florida, Houston, LA, New Jersey, New York, Orange County, Philadelphia, San Diego, San Francisco, Silicon Valley, Tampa Bay, Northern Virginia, and Washington DC.