The country's office vacancy rate reached its highest level in 16 years during the first quarter, according to a report by Reis Inc., a real estate research firm.
The office vacancy rate rose to 17.2 percent, a level it hasn't reached since 1994. That is a 0.2 percent increase from the previous quarter, and 2 percent higher than a year ago. The market lost nearly 12 million square feet of occupied space.
"As labor markets stabilize, we expect occupancies and rents to require another 12 to 18 months before showing signs of improvement, given typical lags in commercial real estate," said Victor Calanog, Reis's director of research.
New York, the largest office market, had an 11.7 percent vacancy rate, an increase of 0.1 percent. Washington DC now has the lowest vacancy rate of 10.4 percent, while Detroit has the highest, of 26.2 percent. In the third quarter of 2007, the country's office vacancy rate reached a cyclical low of 12.5 percent.
"We expect less of a bloodbath in fundamentals in 2010 versus 2009, but rents will still decline and vacancies will still continue to rise," Calanog said.