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National Downtown Office Vacancy at 19.0 Percent, Suburban at 19.5;
 Industrial Vacancy Rises 0.4 Percent to 9.0 Percent
 LOS ANGELES, Aug. 4 /PRNewswire/ -- CB Commercial Real Estate Group announced that in the second quarter of 1992 the national downtown office vacancy rate continued its slow rise to end at 19.0 percent. The rate was 18.8 percent for the first quarter of 1992 and 17.6 percent for the second quarter in 1991. The suburban vacancy rate persisted in its downward trend to end the second quarter at 19.5 percent, down from 19.7 percent for the first quarter and 20.1 percent for the second quarter of 1991. The industrial vacancy rate, rising for the 16th consecutive quarter, was at 9.0 percent, up from 8.6 percent in the first quarter and 7.7 percent in June of 1991. The data was analyzed by Raymond G. Torto, Ph.D., principal of CB Commercial Torto Wheaton Research, Boston.
 Office Buildings
 The second quarter 1992 CB Commercial vacancy survey of office markets across the country revealed a number of noteworthy items:
 -- Office vacancy rates for downtown and suburban space are converging, as the former rise and the latter fall;
 -- the Northeast fared well with some marked declines in office vacancy levels and good absorption;
 -- The California market showed signs of the recession there, bucking an improving trend elsewhere in the country; and
 -- New supply of office space is at an unprecedented low level overall, but about three-fourths of the supply is in downtown markets.
 As of the second quarter the national metropolitan office vacancy rate was 19.6 percent, essentially unchanged from the previous quarter and up 0.2 percentage points over a year ago. The rate had been as high as 21.5 percent as recently as early 1987, and was trending downward very slowly until the first two quarters of 1992. At present the rate is leveling off in the mid-19 percent range.
 About six years ago downtown vacancy rates were about half of the level of suburban rates. Now they are 19.0 percent vs. 19.5 percent for suburban. Over the last quarter the downtown rate rose by 0.2 percentage points while the suburban rate fell by a like percentage. Since mid-year 1991 the downtown rate has risen 1.4 percentage points while suburban rates have fallen 0.7 percentage points. There were 22 downtown markets with vacancy rate increases (they reflect no geographical bias) and 21 with decreases in the survey. Only three remained unchanged.
 Downtown markets with the largest increases and decreases in office space vacancy were these:
 Cur. Pct. Cur. Pct.
 Market Incr. Rate Market Decr. Rate
 Tampa, Fla. 6.4 27.5 Cincinnati 2.5 14.7
 Honolulu 5.0 8.7 Albuquerque, N.M. 2.3 20.6
 Atlanta 2.9 24.3 St. Louis 2.1 20.5
 Indianapolis 2.8 22.0 Phoenix 1.5 24.2
 Ft. Worth/ Sacramento,
 Arlington, Texas 2.0 20.1 Calif. 1.5 11.6
 Calif. 1.3 22.6 Austin, Texas 1.4 23.6
 Chicago 1.1 17.6 Portland, Ore. 1.2 16.8
 Las Vegas 1.1 11.4 San Jose, Calif. 1.1 18.3
 Fresno, Calif. 1.0 30.2 Hartford, Conn. 1.0 17.1
 Nashville, Tenn. 0.9 18.8 Los Angeles 1.0 18.4
 Economically the Northeastern part of the United States has fared poorly over the last few years, but the second-quarter vacancy data showed some positive signs, with office vacancy rate declines in Long Island, N.Y.; Stamford, Conn.; Hartford, Conn.; Boston, and Lower Manhattan, N.Y.; in these amounts:
 (Percentage Points)
 Long Island 2.1
 Stamford 1.2
 Hartford 0.9
 Boston 0.7
 Lower Manhattan 0.3
 More telling for the market is the big increase in net absorption (the change in occupied square footage in a market) over the quarter. The following table shows net absorption for the nation, the Northeast and California, and second-quarter information is contrasted with some historical annual figures.
 Net Absorption of Office Space
 (Square Feet in Millions)
 1992 1991 1987
 2nd Qtr. Annual Annual
 Total 11.5 35.8 96.3
 Downtown 4.4 4.4 27.7
 Suburban 7.1 31.4 68.6
 Total 1.2 3.8 17.1
 Downtown .5 (3.3) 8.9
 Suburban .7 7.1 7.5
 Total 1.6 12.6 27.2
 Downtown 1.0 3.3 5.2
 Suburban .7 9.2 22.0
 In the Northeast there was 1.2 million square feet of net absorption in the second quarter. This is a significant and strong number which, if multiplied by four, would be an estimated annual absorption rate of 4.8 million square feet. In contrast, the annual net absorption for all of 1991 was 3.8 million square feet in the Northeast and in the past quarter net absorption for the region was a negative 390,000 square feet. While the second-quarter figure is definitely a bright light for the Northeast office market, it is far below the annual absorption rate prior to the recession. As the table shows, net absorption was 17.1 million square feet in 1987.
 The good second-quarter numbers reflect better results in the downtown markets of the Northeast. Net absorption in these markets was a negative 3.3 million square feet in 1991 and essentially zero in the first quarter. For the second quarter net absorption was 510,000 square feet. Market observers within CB Commercial believe that there is both good news and bad news in these figures. The good news is that more office space was occupied at the end of the second quarter than at the end of the first. The bad is that tenants are leasing space because rents have fallen to lower levels. At lower rents tenants in the market may take more space than if rents are higher. For the second quarter, at least, this factor is outweighing the effects of consolidation and downsizing by major corporations.
 The California market, which is one of the last in the country being affected by the rolling recession, is actually countering the better second-quarter figures in other parts of the nation. For example, a number of California markets saw increases in their office vacancy rates in the second quarter, including Bakersfield (1.2 percent), Ventura County (1.1 percent), San Jose (1.0 percent) and San Diego (0.8 percent). There were decreases in Orange County (1.2 percent) and Los Angeles County (0.4 percent).
 Aggregate California figures for absorption are more revealing. In the second quarter, net absorption was 1.6 million square feet compared to 2.3 million in the first quarter. Of the 1.6 million square feet, about 1.0 million was in downtown markets. In the first quarter downtown markets absorbed 1.7 million square feet. The California suburbs are reflecting the recession the most. Net absorption of 686,000 square feet in the second quarter contrasts with 624,000 in the first. In 1991, however, the suburbs absorbed 9.2 million square feet. The annualized rate for the suburbs this year is 2.4 million square feet.
 The current state of the office-building market reflects both the national recession and subsequent slow recovery and the severe overbuilding of the 1980s. New supply, however, has declined dramatically over the last few years. In the second quarter 1992, about 8.7 million square feet of new space was added to the market, and 56 percent of it was pre-leased. These figures are consistent with the quarterly numbers over the last year. But in 1985, the peak year of office-building construction, quarterly new-supply totals were as high as 38.4 million square feet. Clearly the trend is downward but some observers hope to see figures even lower. CB Commercial's estimate for the balance of 1992 is that 12.6 million square feet of office space is under construction, or about 6.3 million square feet per quarter.
 Industrial Space
 The CB Commercial Industrial Vacancy Index rose again in the second quarter to 9.0 percent, compared to 8.6 percent in the first quarter. The increase was less than that of the first quarter -- 0.4 percentage points compared to 0.7. The index has been rising steadily since the third quarter of 1988, averaging 0.3 percentage points per quarter, and the trend does not appear to be changing.
 At the regional level markets in the East and West continue to be the weakest. They have the highest rates of vacancy as well as the largest increases over the last quarter. Availability rose 0.4 percentage points in the east to 9.6 percent, and 0.3 percentage points in the West to 9.6 percent. The Midwest and South remained essentially flat. Regional data, including recent trends were:
 Increase of Industrial Space Availability (Percent)
 June March June
 1992 1992 1991
 East 9.6 9.2 8.6
 Midwest 7.6 7.6 6.7
 South 8.3 8.4 8.5
 West 9.6 9.3 7.7
 An analysis of second quarter data shows that of the 36 markets covered by the CB Commercial Industrial Vacancy Index, less than half (14) had declines in availability, while three were unchanged and 19 had increases. The highest and lowest rates were in the same markets as in the first quarter of 1992. The highest was Northern New Jersey (14.5 percent) and the lowest St. Louis (2.5 percent). (These reflect opposing trends, however: availability in Northern New Jersey fell in the second quarter by 0.8 percentage points, while in St. Louis, it rose by the same amount.) Across the nation regional variations seem to be lessening, with neither increases nor decreases being concentrated in any one region.
 A comparison of trends within the different types of space shows that availability in R&D space has fallen steadily over the last year, while availability in manufacturing space was rising in the same period. These trends hold across the country without significant regional variation. Availability in warehouse/distribution space drifted up and down over the year, with the lowest rate occurring in the third quarter of 1991 and the highest in the last quarter of 1991. Overall, rates are lowest in manufacturing space with a national weighted average of 6.1 percent, and the highest in R&D space with a national weighted average of 22.1 percent.
 The largest decreases noted in the Industrial Vacancy Index at June 30 were:
 Percent Vacant At Net
 June 30, March 31, Decline
 1992 1992
 Oklahoma City 7.2 8.7 1.5
 Kansas City 4.9 6.3 1.4
 Indianapolis 5.6 6.9 1.3
 Atlanta 11.3 12.3 1.0
 The largest increases in the Industrial Vacancy Index at June 30 were:
 Percent Vacant At Net
 June 30, March 31, Increase
 1992 1992
 Mid-Hudson, N.Y. 14.2 11.2 3.0
 Cincinnati 6.8 5.7 1.1
 Hartford 11.5 10.5 1.0
 St. Louis 2.4 1.6 0.8
 Metropolitan areas with the highest and lowest availability of industrial space as of June 30 were:
 Highest (Percent) Lowest (Percent)
 Northern New Jersey 14.5 St. Louis 2.4
 Phoenix 14.2 Washington D.C. 2.8
 Hudson N.Y. 14.2 Nashville 3.1
 Mid-New Jersey 12.1 Seattle 3.6
 -0- 8/4/92
 /CONTACT: CB Commercial News Bureau, 213-613-3050, or Raymond Torto of CB Commercial Torto Wheaton Research, 617-345-0011/ CO: CB Commercial Real Estate Group ST: California IN: SU:

JB-AL -- LA002 -- 6503 08/04/92 09:05 EDT
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Date:Aug 4, 1992

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