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Office landlords’ fortunes continue to slide in third quarter

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When it comes to renting office space, it’s a tenant’s market -- to say the least. Third-quarter statistics are rolling in and the news just keeps getting worse for landlords as corporate downsizing and hiring freezes keep demand for offices weak.

The three months ending Sept. 30 marked the seventh consecutive quarter of rising vacancy in U.S. office buildings, real estate analyst Reis Inc. reported Thursday. The change has been so pronounced that the current recession has reversed almost all the gains in occupancy from the real estate boom years of 2006 and 2007.

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The nation saw a net loss of 19.6 million square feet of occupied office space last quarter, Reis said, a slight acceleration in the decline that saw 19.3 square feet empty out in the second quarter. About 16.5% of the country’s office space is now vacant.

‘We’re at a five-year high for vacancies,’ said Victor Calanog, the firm’s research director. ‘The last time we saw vacancies in the mid-16s was at the end of 2004.’

Of course, when vacancies goes up, rents go down. Landlords’ effective rents were down 8.5% in the third quarter, compared with the same period last near. It was the largest year-over-year downturn in effective rents since 1995.

Now, if only employers were in a hiring mood they could expand and lock in what will seem like cheap rents when the economy finally does improve.

-- Roger Vincent

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