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According to the S.J. Wisinski Society of Industrial and Office Realtors report, Class A buildings in the Central Business District fared the best in 2003 by only having its vacancy rate rise by a half-percent from 5.98 percent to 6.44 percent for the year.
Still, this group of downtown office buildings hasn’t come close to matching the 1.7 percent vacancy rate it had in 1999.
The vacancy rate for Class A buildings outside the CBD grew last year to 8 percent from the 6.7 percent reported in 2002. But the suburban Class A market finds itself in better shape this year than in 1999 when its vacancy rate was closing in on 10 percent.
Class B building owners saw their rates rise last year, too, in both the CBD and outside of it. In downtown, vacancies grew by three points from 15.2 percent to 18.4 percent in 2003. In suburban markets, vacancies in Class B buildings went up by four notches from 24.8 percent to nearly 29 percent. The vacancy rate for all Class B buildings in the area is double what it was in 1999.
A review of last year showed that demand was low for leasing space largely due to layoffs and plant closings in the manufacturing sector. But in the second half of the year interest in buying offices surfaced.
“Individuals and companies tend to be looking more for properties to purchase; however, owners are tending to hold on to their properties,” wrote Mary Anne Wisinski-Rosely of S.J. Wisinski.
“There has not been any speculative development in the market except if the property is partially leased,” she added.
Lease rates and sales prices remained fairly stable last year from 2002.
As for this year, S.J. Wisinski projects that the office market will remain flat through June. If the office-furniture market begins to rebound by then, then the demand for office space should rise over the last six months of the year. But if that industry doesn’t bounce back, then of 2004 could be flat.
“The demand and growth of the office market should remain either in downtown or the southeast area with an emphasis on the East Beltline and Interstate 96 area,” wrote Wisinski-Rosely. “There is no new speculative development expected in these areas. No new large firms are moving into the area.”