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 COMMERCIAL SPACE VACANCY THIRD QUARTER REPORT National Downtown Office Vacancy At 17.6 Percent, Suburban At 19.8;
 Industrial Vacancy Drops 0.4 To 8.6 Percent
 LOS ANGELES, Nov. 11 /PRNewswire/ -- CB Commercial Real Estate

Group announced that in the third quarter of 1992, the national downtown office vacancy rate continued its long-term uptrend to end at 17.6 percent. The rate was 17.4 percent (revised) for the second quarter and 16.4 percent (revised) for the third quarter in 1991. The suburban vacancy rate declined to end the third quarter at 19.8 percent, down from 20.3 percent (revised) for the second quarter and 20.4 percent (revised) for the second quarter of 1991. The suburban vacancy rate has been falling slowly for five years and is now under 20 percent for the first time since 1984. The metropolitan office vacancy rate (the average of the downtown and suburban rates) was at 18.9 percent for the third quarter compared with 19.1 percent (revised) for the second quarter and 18.8 percent (revised) for the third quarter 1991. The industrial vacancy rate was at 8.6 percent, down from 9.0 percent in the second quarter but still above the 7.4 percent rate of the third quarter 1991. The data was analyzed by Raymond G. Torto, Ph.D., principal of CB Commercial Torto Wheaton Research, Boston.
 Office Buildings
 The CB Commercial Office Vacancy Index covers 50 markets across the nation. The national aggregate vacancy rates, which average statistics from each local market, mask the wider swings in vacancy rates which may occur in those markets. For example, during the last quarter there were 10 markets where vacancy rates rose by half a percentage point or more, with Salt Lake City jumping 2.4 percent. Conversely, 23 markets had declines in office vacancy rates of half a percentage point or more. Largest declines were in California -- Fresno fell 2.3 percent, and Orange County fell 2.2 percent. Markets having the largest third-quarter moves -- declines or increases -- in office vacancy rates are shown in the following tables.
 Largest Decreases in Office Vacancy at Sept. 30, 1992
 Vacancy Rate - Pct.
 Sept. 92 June 92 Pct. Decrease
 Fresno 16.9 19.2 2.3
 Orange County 19.1 21.3 2.2
 Ft. Lauderdale, Fla. 23.2 25.1 1.9
 Orlando, Fla. 16.9 18.6 1.7
 Nashville, Tenn. 18.4 19.9 1.5
 Fresno 27.2 30.2 3.0
 Ft. Lauderdale 23.3 26.0 2.7
 Miami 24.6 27.2 2.6
 Orlando 16.8 18.9 2.1
 Minneapolis 18.3 20.0 1.7
 Jacksonville, Fla. 17.3 20.3 3.0
 Ft. Worth/
 Arlington, Texas 19.2 21.5 2.3
 Orange County 19.1 21.3 2.2
 Fresno 14.2 16.3 2.1
 San Francisco 12.5 14.6 2.1
 Largest Increases in Office Vacancy at Sept. 30, 1992
 Vacancy Rate - Pct.
 Sept. 92 June 92 Pct. Increase
 Salt Lake City 21.3 18.9 2.4
 Hartford, Conn. 25.2 23.6 1.6
 Atlanta 21.0 19.6 1.4
 Honolulu 8.5 7.2 1.3
 Charlotte, N.C. 18.9 18.1 0.8
 Atlanta 31.0 24.3 6.7
 Charlotte 18.2 16.0 2.2
 San Francisco 13.2 11.0 2.2
 Ft. Worth/Arlington 22.0 20.1 1.9
 Salt Lake City 20.2 18.3 1.9
 Salt Lake City 23.1 19.8 3.3
 Hartford 28.6 26.4 2.2
 Honolulu 6.8 5.4 1.4
 Sacramento, Calif. 18.1 16.9 1.2
 Seattle 14.1 13.3 0.8
 The health of an office building market depends on its balance of supply and demand for office space. Analysts track square footage of new building completions to measure supply and net absorption -- the change in occupied square feet -- for demand. The following table shows supply and absorption for the third quarter 1992, the first half of 1992, and the years of 1991 and 1987.
 Absorption/Completions (Million Sq. Ft.)
 3Q/1992 1-2Q/1992 1991 Avg. Qtr. 1987 Avg. Qtr.
 Nation 6.6 9.5 11.2 25.5
 Downtown 5.3 7.5 5.5 7.9
 Suburban 1.3 2.0 5.7 17.6
 Nation 11.3 6.9 9.0 24.0
 Downtown 5.0 2.7 1.2 8.0
 Suburban 6.3 4.2 7.8 16.0
 Current trends are evident from the table. On the supply side it is clear that completions are falling dramatically. Nationally, completions in 1987 were running at 25.5 million square feet per quarter. Completions dropped to 11.2 million square feet in 1991 and to an average of 9.5 million square feet for the first two quarters of 1992. The third quarter total of 6.6 million square feet is extremely low by historic standards.
 The completions figures show that most of the new supply in 1992 is being created in downtown markets. Downtown completions at 5.3 million square feet is more than three times the suburban figure and 80 percent of the total. This is the cause of rising vacancy rates in downtown markets. The pipeline is fairly dry, however, for the balance of the year and this is fortunate for most markets.
 The other noteworthy feature of this table is third quarter absorption. The 11.3 million square feet of net absorption is well above the average for the first two quarters of the year and above the average for all of 1991. Further, it is a respectable comparison with the quarterly average of 24 million square feet in 1987 which was a peak year for net absorption. The third quarter, in addition to showing a higher level of absorption, had a sharp rebound in downtown absorption.
 Is the strong showing of absorption a sign of renewed demand in the office market -- or just an aberration to be followed by weaker figures in three months? Given the uncertain state of the economy and the very modest growth, if any, if office-related employment, we believe that the strong absorption figures are reflective of "bargain basement" rents and the leasing of office space today by tenants who expect to grow in the future. Essentially they are occupying office space today with the expectation of more intense use in the future. This interpretation of the figures implies that when these tenants have new office-related employment in the future they already will have the space they need, leased now at the low prices presently available. Thus, future economic growth may not lead to better absorption statistics.
 This interpretation of the third-quarter figures is supported by analysis of the absorption which is taking place. First, net absorption in downtown markets has rebounded in this quarter from a quarterly rate of 2.7 million square feet to 5.0 million square feet. In 1991, the quarterly rate of net absorption was only 1.2 million square feet. Second, some of the large jumps in absorption are taking place in markets suffering from the most serious over-building and having rent softness. It is also in these markets that the overall economy has been weak for some time. These markets include some in the Northeast where third quarter absorption was 2.4 million square feet in downtown areas, compared with a negative absorption in 1990 and 1991 and positive absorption of 255,000 square feet per quarter in the first two quarters of 1992.
 Industrial Vacancy
 The CB Commercial Industrial Vacancy Index fell during the third quarter, with the national average returning to the first quarter rate of 8.6 percent (from 9.0 percent in the second quarter). It is possible that the overall market has finally bottomed out, but probably more likely that users are expanding while rents and construction costs are relatively low. The trend should become clearer in the next two quarters.
 At the regional level, markets in the east and west continue to have higher vacancy rates than those in the Midwest and South. Rates dropped in every region in the third quarter, however. The West showed the largest decrease, falling from 9.6 percent to 9.1 percent.
 While vacancy in the South declined only 0.1 percent, it was the only region which showed a decline in availability over the whole of 1991. Following are current regional data and trends.
 Regional Availability of Industrial Space (Percent)
 Region 3Q/1992 2Q/1992 3Q/1991
 East 9.5 9.6 8.7
 Midwest 7.4 7.6 6.9
 South 8.2 8.3 8.5
 West 9.1 9.6 8.3
 Third quarter data shows that 20 of the 36 markets covered by the Industrial Vacancy Index had declines in vacancy, while 16 markets had increases. There were no markets where rates remained flat. There was a shift among markets reporting the highest and lowest vacancy rates. Westchester/Mid-Hudson now has the highest rate (16.7 percent) and Washington, D.C. now has the lowest (1.9 percent). It appeared last quarter that regional variation were lessening, but third quarter data does not reflect that trend. Once again the East is reporting the highest vacancy rates and the Midwest the lowest. Further, the gap between the two is widening. The West is now showing higher availability than the south, just the reverse of the situation a year ago.
 National availability in manufacturing and warehouse/distribution space is following the same trend as that of the overall market -- higher than rates were a year ago, but lower in the third quarter than in the previous quarter. Availability in manufacturing space now stands at 8.6 percent nationally, while the rate for manufacturing/distribution space is 14.2 percent. Rates for R&D space continue to fall significantly. They now average 15.4 percent nationwide, a drop of 1.5 percent from the second quarter and down 2.8 percent from a year ago. Regionally, trends are similar, with three exceptions: availability of manufacturing space actually rose in the third quarter (from 10.6 percent to 10.9 percent), while rates in manufacturing space in the east and warehouse space in the Midwest both were flat.
 The largest quarterly decreases noted in the Industrial Index at Sept. 30 were:
 Percent Vacant At Net
 Sept. 30, June 30, Decline
 1992 1992
 Chicago 9.5 12.0 2.5
 Boston 7.3 8.9 1.6
 Portland, Ore. 2.5 3.9 1.4
 Northern New Jersey 13.3 14.5 1.2
 The largest increases were:
 Percent Vacant At Net
 Sept. 30, June 30, Increase
 1992 1992
 Westchester/Mid-Hudson 16.7 14.2 2.5
 Indianapolis 7.3 5.6 1.7
 Salt Lake City 9.1 7.5 1.6
 Tampa, Fla. 5.3 4.2 1.1
 Metropolitan areas with the highest and lowest availability as of Sept. 30, 1992, were:
 Highest Percent Lowest Percent
 Westchester/Mid-Hudson 16.7 Washington D.C. 1.9
 Phoenix 13.7 Portland 2.5
 No. New Jersey 13.3 St. Louis 2.7
 Mid New Jersey 13.0 Nashville 2.9
 -0- 11/11/92
 /CONTACT: CB Commercial News Bureau, 800-637-3156; or Raymond Torto, principal of CB Commercial Torto Wheaton Research, 617-742-5744/ CO: CB Commercial Real Estate Group ST: California IN: SU:

LS-BP -- LA005 -- 9605 11/11/92 09:05 EST
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Date:Nov 11, 1992

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