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U.S. Office and Industrial Vacancy Rates Continued to Drop in Q4 2010

Retail Availability Remains Steady, Multi-Housing Demand Strong

Boston – January 7, 2011 – The national vacancy and availability rates in the U.S. office and industrial markets, continued to decline in the fourth quarter (Q4) of 2010, according to the latest analysis from CBRE Econometric Advisors (CBRE-EA). In Q4, the national office vacancy rate fell by 20 basis points (bps) to16.4%, the second consecutive quarterly decline. The national industrial availability1 rate decreased by 30 basis points in Q4 to 14.3%, marking the second consecutive decrease in availability and providing further proof that the industrial sector continues to heal.

In retail, the overall availability rate remained at 13.0% in Q4 —unchanged compared with the previous quarter.  The vacancy rate for the nationwide same-store sample of 3.6 million professionally-managed apartment units came in at 6% in Q4.

"The breadth and consistency of improvements are exactly what has been hoped for by those looking for a signal that the corner has been turned," said Jon Southard, Director of Forecasting, CBRE-EA. "However, to put this information in context, with the exception of multi-housing, several additional quarters of this pace of improvement will be necessary to bring vacancy rates back to historic norms"

CBRE-EA’s Q4 2010 analysis found that, as with previous, recent quarters, suburban office markets continue to outperform downtown areas; the suburban vacancy rate declined by 30 bps, while the downtown vacancy rate declined by 20 bps. This is the first decline for downtown submarkets since the third quarter of 2007. The office market generally continued to make strides toward recovery in Q4. Improved leasing velocity and a depleted construction pipeline has helped push the office vacancy rate down from its cyclical peak reached during the second quarter of 2010.

Vacancy rates declined in 30 of the 57 markets tracked during Q4, with 10 remaining unchanged and 17 experiencing vacancy increases.  Florida markets, having been severely affected by the housing slowdown in 2008 and 2009, have recently been showing signs of stabilization as their economies start to recover. They were among the best performers in Q4 2010, as vacancy rates declined by 60 bps in Tampa and Orlando and by 130 bps in Jacksonville. Energy and other resource-driven markets of Texas were also among the top performers, as Houston and Fort Worth had their vacancy rates fall by 80 and 50 bps, respectively.    

Q4 continued to bring improvement to the industrial market with reported declines in availability rates as widespread as they have been at any point in recent memory. Although availability rates remain near record highs, suggesting there is still much slack to be worked off within the sector, low construction and an improving economy should continue to lower availability moving forward.   During Q4 2010, 39 markets reported falling availability rates, four saw no change, while the remaining 15 reported increases.      

In retail, the holiday shopping season trends were positive even though not significantly evident in increased shopping center occupancy. Year-over-year growth in core retail sales has been steadily improving since May and growth was above 6% as of November—a good indicator that the consumer recovery is sustainable.  With the exception of ten markets,  retail markets are generally recording double-digit availability rates.  San Francisco, New York City, Oakland, Long Island and Miami are among those maintaining the lowest (and single-digit) availability rates.  Twenty markets saw improvement in availability rates compared to last quarter (another six were flat); of these, eight also recorded declines compared to one year ago (Columbus, Boston, Long Island, Atlanta, Oakland, Miami, Baltimore and Washington DC). 

Preliminary data indicates that the pace of the U.S. apartment recovery remains strong.  The national vacancy rate usually increases by about 80 bps in the seasonally weak fourth quarter, yet it only increased by 20 bps in Q4 2010, marking one of the strongest year-end performances on record. For the year as a whole, the national vacancy rate declined by 130 bps from an average of 7.4% in 2009 to 6.1% in 2010, while growth in apartment demand has accelerated from 108,000 to 258,000 units.  Across markets, vacancy rates are quickly approaching their historical norms.

1 Availability is space that is actively being marketed and available for tenant build-out within 12 months.

 

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CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2009 revenue). The Company has approximately 29,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our Web site at www.cbre.com.

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