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RECENT TRENDS PERSIST WITH SLOW RISE IN DOWNTOWN OFFICE VACANCY, FALL IN SUBURBAN; INDUSTRIAL VACANCY RISING

 RECENT TRENDS PERSIST WITH SLOW RISE IN DOWNTOWN OFFICE VACANCY,
 FALL IN SUBURBAN; INDUSTRIAL VACANCY RISING
 Commercial Space Vacancy Year-End Report
 LOS ANGELES, Jan. 22 /PRNewswire/ -- Commercial real estate vacancy rates released by CB Commercial for the fourth quarter of 1991 showed a year-long trend of downtown office vacancy rates rising and suburban rates falling. The downtown vacancy rate was 18.1 percent at Dec. 31, up from 17.1 percent at 1990 year end, and up 0.1 percent compared with 1991 third quarter. The suburban rate at Dec. 31 was 19.7 percent, down from 20.4 percent at the end of 1990. At the end of the 1991 third quarter it was 20.0 percent. The combined rates show a metropolitan office vacancy rate of 19.4 percent, compared with 19.5 percent at 1990 year end and 19.4 percent for the 1991 third quarter.
 The industrial space vacancy rate stood at 7.9 percent for 1991 year end, unchanged from the 1991 third quarter, but up 0.6 percent from 1990 year end, given revisions in the rates of the last two years.
 The information was compiled by CB Commercial Real Estate Group Inc. (formerly Coldwell Banker Commercial Group), and analyzed by Raymond G. Torto, Ph.D., principal of CB Commercial Torto Wheaton Research, Boston, a subsidiary of the multi-market commercial realty company.
 Office Buildings
 Notwithstanding vacancy rates, in 1991 an additional 35.8 million square feet of office space was occupied by tenants nationwide, bringing the total occupied space in the 53 markets surveyed to 2.1 billion square feet. The metropolitan vacancy rate remained unchanged at 19.4 percent as the supply of new office space coming on the market offset the gain from absorption, with downtown markets losing ground and suburban markets gaining slightly.
 Also, the net absorption of 35.8 million square feet in 1991 must be viewed in context. It was only 50 percent of 1990's net absorption of 67.8 million square feet, and only about a third of the figure for 1987 -- the peak year for net absorption. In fact, net absorption has been steadily declining since 1987, as shown in the following table. The declining net absorption trend clearly reflects the slowing economy in 1989, the beginning of the recession in 1990 and its continuation in 1991. This recession is distinguished from earlier ones by its pronounced impact on white-collar, as well as blue-collar, employment. This is the first time that financial services, legal and accounting professions have been dramatically impacted by a recession.
 The table also demonstrates the disparity in net absorption trends between downtown and suburban markets. The decline in absorption is clearly more pronounced in downtown markets. For all of 1991 net absorption was 4.6 million square feet in the nation's downtowns, only 17 percent of the 1987 peak year, while suburban absorption in 1991 was about 45 percent of the 1987 level. In its commercial real estate dimension, this recession is clearly a downtown, white-collar phenomenon.
 National Office Market: Net Absorption 1987-1991
 (Million square feet)
 Metropolitan Downtown Suburban
 Year Markets Markets Markets
 1987 96.3 27.7 67.1
 1988 88.6 20.3 68.1
 1989 86.4 22.1 64.2
 1990 67.8 10.6 57.3
 1991 35.8 4.6 31.2
 The effect of the recession by region of the country is striking. The East actually had a negative amount of absorption in 1991 as the total of occupied square footage fell by 1.7 million square feet. In contrast, net absorption in the East was a positive 2.3 million square feet in 1988. Downtown markets in the Midwest were likewise impacted by the recession. Net absorption there for all of 1991 was 215,000 vs. 7.4 million square feet in 1988. Both the South and the West fared better with good levels of absorption, although each area showed a decline.
 Office Absorption by Region: 1991 vs. 1988
 (Million square feet)
 East Midwest South West
 1991 (1.70) 2.22 1.79 4.36
 1988 2.30 7.40 2.40 8.00
 With absorption falling, many downtown markets have recorded steep upturns in vacancy rates. This is due both to negative absorption and the residual effect of the 1980s building boom. Some larger projects begun in 1988 or 1989 are now coming on the market. Some examples of downtown markets with very significant rate increases during 1991 are:
 Percent increase
 Kansas City 8.3
 Cleveland 5.5
 San Diego 5.2
 Cincinnati 4.6
 Ft. Lauderdale, Fla. 4.4
 Charlotte, N.C. 4.3
 Tucson, Ariz. 4.1
 Baltimore 3.6
 Los Angeles 3.4
 This list is noteworthy in that it spans the United States with very little regional pattern. There were some downtown markets which had a decline in vacancy in 1991. In Oklahoma City, the rate fell 3.2 percent -- although it still stands at 32.7 percent. In both Tampa, Fla., and Ft. Worth, Texas, the downtown rate fell 2.0 percent and in Miami it fell 1.7 percent.
 In suburban office markets, vacancy rate declines led increases by a significant margin. Nationally, suburban vacancy rates fell 0.7 percent during 1991. Suburban markets showing the sharpest declines were:
 Percent Decrease
 Austin, Texas 7.3
 Ventura, Calif. 6.9
 Portland, Ore. 4.6
 Long Island, N.Y. 3.6
 Albuquerque, N.M. 3.1
 Industrial Property
 The Industrial Index of available space in buildings of 100,000 square feet and larger remained at 7.9 percent in the fourth quarter, unchanged from the previous quarter but up 0.6 percent from 1990 year- end. CB Commercial Real Estate notes that a shift occurred in the location of vacant space in the nation. At 1990 year end, there were six markets in the survey with vacancy rates of 10 percent or higher, the highest rate being 13.2 percent. A year later, there were 10 markets in this category -- only two of which were among the six noted for 1990 -- and the highest rate is 16.3 percent.
 Concurrently, several markets achieved lower vacancy rates in 1991. Markets with increased rates outnumbered those with lowered rates, but the average drop was 2.5 percent, compared with an average increase of 1.6 percent.
 There has also been a shift in the percentage of available space, which is vacant. At 1991 year-end, 65 percent of all available space was vacant, compared with 66 percent at the end of the third quarter. This would seem to indicate a possibility of increased activity in industrial real estate during the first quarter of 1992 since more tenants are planning to move. (The increase in space available but still occupied indicates an increase in tenants who have given notice and plan to move.)
 Following were the largest decreases noted in the Industrial Index at Dec. 31, 1991:
 Percent Vacant at Percent
 12-31-91 9-30-91 Net Decrease
 Oklahoma City 8.3 10.1 1.8
 St. Louis 1.4 2.5 1.1
 Stamford, Conn. 9.4 10.5 1.1
 Dallas 8.9 9.7 0.8
 The largest increases in vacant industrial space were:
 Percent Vacant at Percent
 12-31-91 9-30-91 Net Increase
 Tampa, Fla. 5.3 3.7 1.6
 Northern New Jersey 16.3 15.1 1.2
 Charlotte, N.C. 7.1 6.0 1.1
 Atlanta 10.9 10.2 0.7
 Metropolitan areas with the highest industrial vacancy rates as of Dec. 31, 1991, are:
 Percent Vacant
 at 12-31-91
 Northern New Jersey 16.3
 Phoenix 15.0
 Westchester, N.Y. 12.1
 Mid-New Jersey 11.2
 Metropolitan areas with the lowest industrial vacancy rates as of Dec. 31, 1991, are:
 Percent Vacant
 at 12-31-91
 St. Louis 1.4
 Seattle 2.7
 Washington, D.C. 2.7
 Nashville, Tenn. 3.2
 -0- 1/22/92
 /CONTACT: Raymond Torto of CB Commercial Torto Wheaton Research, 617-742-5744; or the CB Commercial News Bureau, 800-366-0771/ CO: CB Commercial Real Estate Group Inc. ST: California IN: FIN SU:


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