Office market should improve next year

The office market could experience gains next year.

Those commercial property managers who own office space may experience improving market conditions next year, as well as in 2014.

The office rent level should rise significantly next year, which is due to a projected improvement in the country's level of employment. According to a report from CBRE Group, the average rent level should jump 3.5 percent next year, while it will likely climb to 4.4 percent in 2014.

Employment for companies using office properties should experience a jump to a point not seen since before the recession began by the end of next year, the report noted. This was possible at an earlier point, but caution from business owners due to the sluggish economy prevented these gains.

"Although concerns remain about the recovery in the face of headwinds both at home and abroad, we have seen consistent improvement in broader markets and believe that the economy is slowly gaining traction," said Arthur Jones, senior managing economist for CBRE Econometric Advisors. "Businesses remain healthy and continue to hire and we have seen significant improvement in the housing market, which should provide the impetus for stronger growth by the middle of 2013. As a result, we expect office fundamentals to continue their slow, but steady, recovery throughout the next year."

Vacancy rate to continue drop next year
The office vacancy rate for this year continued to drop from the cyclical high recorded two years ago, and this trend will likely keep up in the next two years. The report explained that the third quarter's vacancy rate was 15.5 percent, which was a significant decline from the 16.8 percent recorded during the second quarter of 2010.

The vacancy rate should fall further next year, as the figure will likely decline to 14.9 percent, according to the firm. Vacancies will then decline nearly 1 percentage point more in 2014, as the end of that year may have a level of 13.8 percent.

Vacancy decline projections were recorded by other reports, as well. The National Association of Realtors noted in its latest commercial real estate forecast that there should be a 1 percentage point drop in office vacancies in the next year, to a level of 15.7 percent. The metropolitan statistical area with the lowest office vacancies in the country during the fourth quarter was Washington, D.C., which had a rate of 9.6 percent.

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