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The Office Rental Paradox

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Wow, and I thought the home and rental property markets were in bad shape!  Apparently, office rentals are really struggling right now on several levels.  I wasn’t aware of these problems until I read a Wall Street Journal article on the subject.  It’s a great article and the central focus of this post.  I’ve summarized the key points immediately below, and the link to the full article can be found at the bottom of the page.

Here is the bottom line: With fewer real estate developers showing interest in developing office rental space, office-building construction is at its lowest point since the 1960s. Earlier crashes in the real estate market were characterized by a sustained effort to continue construction at a slower pace, but the current market is failing to raise any level of interest at all from developers.

Experts ascribe this trend to the growing vacancy rates among office buildings. Not only have firms been letting go of office space, the pressure of tightening budgets is forcing many employers to crowd more and more employees into smaller offices. With the economic recovery being listless at best, office space owners predict it might take several years for the existing office rental space to be fully occupied.

While this is true for the current market trends, the other thing to worry about is what would happen should the rate of recovery suddenly spurt up. Large firms in the metropolitan cities hire as quickly as they fire, and if the economy picks up faster than expected, the market could end up witnessing rocketing office rental rates and real estate prices.

To continue reading this story in more detail, please click here.

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