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WASHINGTON, DC-A new report on national office trends by Delta Associates, authored by research specialist Alexander Paul, finds that absorption of office space will continue to increase for the remainder of the year, but could well begin to level off next year and in 2009. Already, the report finds, many metro areas have experienced vacancy rates well under their equilibrium rates thus far.

“In the coming year, a combination of lower job growth and record space under construction will likely help push vacancy toward equilibrium rates as the national economy slows,” it said. According to Delta, the nation’s overall vacancy rate–a number that includes the sublease vacancy–was 10.5% at mid-year 2007. At mid-year 2006 that number was 11%–a decrease of 50 basis points. Two years ago, at mid-year 2005, the national vacancy rate was 12.6%.

Washington, DC is among the top three cities–following New York City, and before Los Angeles-Orange County–that are expected to lead the nation in net office space absorption this cycle. Washington, DC’s federal presence–particularly the defense and security sectors–will continue to buoy the area. Also, Delta notes, construction remains strong here. For their part, New York derives strength from the financial and professional services industries and, Los Angeles, from manufacturing, trade and tourism.

Signs that office absorption in Washington, DC is heading towards greater equilibrium are already manifest. Delta reports that the Washington, DC area, which has an office vacancy rate of 9.1%, absorbed 1.7 million sf of office space in the first half of 2007. For the period 2004-2010, it is expected to absorb an average of six million sf per year. The area had 18.4 million sf of office space under construction at mid-year 2007, of which 35% is preleased.

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