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Third-quarter report shows less than 1 percent positive absorption and steadily declining leasing volume amid lowered expectations for job creation and economic growth at home and abroad.
CHICAGO, Oct. 9, 2012 — The U.S. office recovery continued to slow in the third quarter and stalled out in many metros, with a handful of mostly West Coast and Texas markets accounting for slight overall gains in absorption, occupancy and rental rates since midyear. Tenants soaked up a scant 7.4 million square feet of office space, a quarterly gain of 0.5 percent that nudged year-to-date absorption to 19.5 million square feet, or 20.5 percent less than a year ago, according to Jones Lang LaSalle’s Third-Quarter 2012 Office Highlights Report.
“As troubles continued to spread across Europe and global growth expectations reset, corporates across the U.S. have responded and increasingly moved to the sidelines when dealing with longer-term growth and real estate decisions,” said John Sikaitis, Senior Vice President of Research at Jones Lang LaSalle. “As a result, leasing activity levels throughout the U.S. have steadily declined as these problems have spiraled outward and onward.”
Sikaitis continued, “That steady decline is most evident in East Coast markets as they have almost completely disappeared from the recovery after being the main driver in 2010. So far this year, the tech and energy sectors along with markets in the Sun Belt have been the primary drivers of recovery.”
Net Absorption as a Percent of Inventory
Third-Quarter 2012 Commercial Real Estate Highlights
Leasing momentum, together with absorption and rent growth, will likely be muted through the remainder of 2012, Sikaitis predicted.
“Tenants will continue to maintain the upper hand in the leverage game across most geographies not dominated by tech and energy,” said Sikaitis. “The leverage paradigm is not likely to shift back to landlords until sustainable employment growth returns to higher levels, economic growth is recaptured and our domestic geopolitical situation is resolved with a focus on generating policy that develops sustainable, longer-term solutions to debt levels, and spending, tax and entitlement reform.”
Jones Lang LaSalle’s research team delivers intelligence, analysis, and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Its 300 professional researchers track and analyze economic and property trends and forecast future conditions in over 70 countries, producing unrivalled local and global perspectives. Its research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for its clients and drives successful strategies and optimal real estate decisions.
For greater detail on Jones Lang LaSalle’s research, visit the firm’s reports at: www.us.joneslanglasalle.com. About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.
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