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U.S. Commercial Real Estate Market Experiencing Decelerating Recovery, According To Jones Lang LaSalle

CHICAGO, April 4, 2012 /PRNewswire/ -- The recovery across the U.S. office sector continued in the first quarter of 2012, but at a substantially slower pace than witnessed in the latter part of 2010 and throughout 2011, according to Jones Lang LaSalle's First-Quarter 2012 Office Outlook.

(Photo: http://photos.prnewswire.com/prnh/20120404/CL81882 )

"Overall, the first quarter presented a mixed bag of results and expectations for the rest of the year," said John Sikaitis, Senior Vice President of Research at Jones Lang LaSalle. "While the recovery slowed during the quarter, it remains intact. Looking ahead to the remainder of 2012, markets will continue to recover and, in some cases, contract at different rates of speed. Overall rents across most markets will grow, but at slow and measured paces unless some significant cushion of technology or energy pockets exist."

First-Quarter 2012 Commercial Real Estate Highlights
  • The U.S. office market absorbed a little less than 1 million square feet during the quarter – far below the 8.6 million square feet averaged over the prior six quarters.
  • Nearly two-thirds of the 45 markets tracked demonstrated stable or declining leasing volumes.
  • Technology expansion and startup activity gained momentum in almost every market with prospects for growth.
  • Energy-heavy markets posted some of the largest leases and witnessed sales momentum and speculative new construction.
  • Despite declines in leasing volume, 57.8 percent of the markets saw gains in tour velocity and active tenants compared to the previous quarter.
  • Sales activity and volume was evenly distributed among geographies with nearly one third of markets reporting an uptick in sales.
  • Construction remained low across most markets; however, activity has increased from 18.1 million square feet under development to 33.7 million square feet.

Regional Real Estate Highlights

New York, Washington DC, and Chicago

The nation's largest markets, accounting for more than 25 percent of inventory, lagged substantially and lowered absorption levels for the country with approximately 2.2 million square feet of occupancy declines. Further, Washington DC and New York demonstrated leasing velocity levels that were down nearly 45 percent from the previous quarter. New York and Washington will likely see stagnant fundamentals the remainder of the year because of the uncertain political environment and the financial sector (i.e. uncertain regulatory environment for the financials).

Houston Houston continues to lead new demand driven by the robust energy sector fueled by increasing oil prices and the continued exploration and expansion of the natural gas sector. Absorption neared one million square feet, rents continued to grow and speculative construction returned to the market.

Denver

Denver also demonstrated continued market tightening – nearly 250,000 square feet of absorption – largely as a result of emerging natural gas sector.

Los Angeles

After lagging the recovery for the past two years, Los Angeles showed increased activity in the first quarter with more than 500,000 square feet of net absorption largely being driven by the entertainment and gaming industries concentrated in the Westside and LA North.

Florida ( Fort Lauderdale, Jacksonville, Miami, Orlando, Tampa Bay and West Palm Beach)

Four of the six major markets in Florida demonstrated positive absorption and the state overall registered nearly 400,000 square feet of net absorption.

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.  The firm's 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.

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