Vacancies and negative absorption

One more Journal story this morning:

Businesses are dumping office space at the fastest pace since the months after the Sept. 11 attacks, increasing the financial stress on commercial-real-estate owners and their lenders, many of them already ailing financial institutions.

This of course can put pressure to lower rents and add incentives. Vacancies are up in 66 of 79 markets, but rents are stable or declining in 40 of those 79; that makes sense since rent changes trail vacancies.

For the third quarter in a row, businesses vacated more space than they took nationwide, a phenomenon known as negative absorption. About 18 million square feet of space were emptied, the most since the first quarter of 2002, when 23 million square feet were vacated. With the addition of 11.5 million square feet of new space, the nation's office vacancy rate rose 0.5 percentage point to 13.6%, the biggest increase since the months following 9/11.

This isn't panic mode. As the story points out, we didn't have massive overbuilding like we had in the 1990s. But there is a trend thanks to consolidations, closures, bankruptcies and the inability to get money, either at all or at a decent rate. So 2009 could be interestin.

Speaking of 2009: I don't know what the national picture is since real estate is largely local, but we have a lot of new space coming on line in Chicago next year, which is essentially piling on. So if you are a tenant, you might be in good shape for space, price and terms.