Moreover, the report says the office market may recover more quickly than industrial. The office market experienced positive absorption, although just 6,400 sf, for the first time in the past twelve months, according to the report.
Much of the activity has been smaller lease transactions, mostly in the range of 4,000 sf to 8,000 sf, according to the report. While the CBD has seen a two-point decrease in sublease vacancy, the Westside markets are still wobbly, with class A vacancy hovering at 20%. Although most asking rental rates have not decreased, the report states that overall effective rents in the office market have decreased by approximately 10% due to increased concessions offered to both new and renewal tenants.
The industrial market was slower to feel the downturn than the office market, and it is taking longer to recover. Over 580,000 sf of negative absorption occurred in the first quarter; representing 45% of the year-to-date total in 2001 and increasing the overall vacancy rate two points to 13.56%.
In response, concessions have surfaced. "Some landlords are offering up to three months upfront free rent to secure a five-year lease on direct vacant space," states the report. Most of the lease activity has been generated by the more traditional warehouse and manufacturing uses and range in size from 15,000 to 30,000 square feet. Colliers' brokers are also witnessing an increase in user and multi-tenant building sale listings.
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