Office
Applied Analysis is reporting that office vacancy rates have risen to 9.9% during the third quarter of 2006. In the coming year, they are predicting that it is also likely that those rates will surpass 12% as more offices construction projects complete.
Supply is beginning to outpace demand. Ofice inventory grew by 422,000 square feet, but demand only supported an additional 272,000 square feet. Supply will only get worse as another 4.4 million square feet is currently under construction, and another 6.8 million square feet is planned.
Why so much construction in the pipeline? Blame it on market conditions 18 months ago when most projects were financed and designed. At the time, land values were rising, employment was strong, interest rates were low and construction costs were stable, but that has since changed.