Oct 10th 2007 Reno Office Market Review 3rd Quarter 2007
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In the third quarter of 2007 the Northern Nevada office market returned to the trend line of ever increasing vacancy. After taking a brief reprieve during the second quarter, the total market vacancy increased to 17.9% from 16.9% last quarter and 17.4% at the beginning of 2007. Sublease space continues to be a thorn in the side and will continue to pose a major threat to the market. The market vacancy would be 19.7% if it were calculated including the available sublease space. The availability of a large amount of direct lease and sublease space coupled with light tenant demand continues to impede the office market. This trend is expected to continue into the second quarter of 2008. Class A office space continues to hold the position as the strongest classification with the lowest vacancy rate. Class A properties finished the quarter with vacancy rising to 12.4% from 11.7% at the end of the last quarter. Although Class A remains strong in direct vacancy the group has the highest percentage difference in vacancy including sublease space. The classification vacancy would increase over three percentage points when calculating all space currently on the market for both lease and sublease. Value tenants and tenants retracting from Class A suites helped reduce the vacancy in Class B office product. Overall vacancy in Class B dropped slightly to finish at 22.9% down from 24.7% and was very minimally impacted by sublease availabilities. Class B vacancy with sub-lease space included would only increase to 24.1%. Garden product remained statistically flat at 22.3% and 22.5% with sublease space included in the third quarter.
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