Asking Prices for Office Rents to Remain Flat : Market Still Tight, Survey of 12 Areas in Nation Concludes
Flat asking rents will continue this year in most areas of the nation as the glut of office space continues, according to a survey of 12 major areas conducted by Colleen Rabin Associates, Beverly Hills.
A few markets will start to tighten toward the end of the year as a result of slowed or no new construction, according to Colleen Y. Rabin, but other markets with massive inventories of office space will see no improvement within the next few years.
The 1985 downturn in asking rents--averaging a 3% drop for new buildings--follows two years of slight increases in asking rents, she said.
Asking rents are much higher than effective rents--what the tenant negotiates to pay, she added. Effective rents are as much as 10% to 50% below asking rents when adjusted for such rent concessions as free rent, paid moving expenses, lease buy-outs and additional tenant improvements.
Seven of the 12 cities surveyed experienced decreases in rents from 3% to 13% below 1984 levels, Rabin said. Five areas indicated flat or slight increases in rents: Orange County, Denver, Chicago, Washington and downtown New York.
OFFICE RENTAL RATE TRENDS
Trends in major downtown areas
Asking Rent Average Rental Rate Range DEC. 1982 DEC. 1983 DEC. 1984 DEC. 1985 Los Angeles $24-32 $24-34 $28-34 $26-33 Orange County* $18-24 $18-27 $20-30 $20-30 San Francisco $30-40 $25-38 $26-35 $25-32 Seattle $14-19 $16-24 $17-25 $17-24 Denver $18-26 $18-26 $18-26 $18-26 Houston $14-24 $16-26 $$16-26 $16-25 Dallas $17-25 $18-26 $19-28 $19-26 Chicago $20-22 $21-24 $21-30 $22-32 Atlanta $13-23 $16-26 $16-26 $16-25 Washington, D.C. $21-26 $18-32 $22-36 $22-36 New York, Midtown $30-60 $35-65 $33-75 $34-65 New York, Downtown $29-42 $28-45 $25-42 $29-42 AVERAGE $20-30 $21-33 $22-34 $22-33
*Irvine/Newport Beach Airport Area Note: Asking rent is for existing Class A buildings and is quoted on a full-service basis, per rentable square foot. Rental rates are asking rates, not necessarily effective when concessions are considered. Rental ranges exclude extremes.
ANNUAL CHANGE
In percent
1982-1983 1983-1984 1984-1985 LOWER UPPER LOWER UPPER LOWER UPPER RANGE RANGE RANGE RANGE RANGE RANGE Los Angeles 0 6 17 0 -7 -3 Orange County 0 13 11 11 0 0 San Francisco -16 -5 4 -8 -4 -8 Seattle 14 26 6 4 0 -4 Denver 0 0 0 0 0 0 Houston 14 8 0 0 0 -4 Dallas 6 4 6 8 0 -7 Chicago 5 9 0 25 5 7 Atlanta 23 13 0 0 0 -4 Washington, D.C. -14 23 22 13 0 0 New York, Midtown 17 8 -6 15 3 -13 New York, Downtown -3 7 -11 -7 16 0 AVERAGE 5 10 5 3 0 -3
Source: Coldwell Banker Commercial Real Estate Services; Carter & Associates Inc., Atlanta; Colleen Rabin Associates, Beverly Hills.
