Vacancies Jump!

Vacancies Jump

Nationally, the office vacancy rate jumped 250 basis points in the first half of 2001 from 8.3% to 10.8%. According to Torto Wheaton Research, the 8.3% rate at the beginning of the year was a 19-year low.

Locally, the Boston area went from a 3.9% office vacancy to 8.7%. Not surprisingly, areas with the greatest concentration of high-tech workers like Boston, Austin, and San Jose, saw the greatest increases in vacant space.

The national industrial vacancy rate of 6.7% at the beginning of 2001 also was the lowest in a long time (since 1984). By mid year, however, industrial vacancies rose to 8.2%.

Unlike the last recession, most vacant space is coming from existing buildings where layoffs occurred or expansion plans were canceled. The last recession was worse because of the double whammy: 1) the shrinking occupancy in existing buildings, and 2) overbuilding in which much of the vacant space came from newly completed or mostly completed buildings that were never leased or occupied.

Still, unemployment is on the rise. Nationally, unemployment rose to 4.5% in July from a recent low of 3.9% in the fall of 2000. In New England, unemployment rose to 3.7% in July from a recent low of 2.4% in January of this year.

In addition, the Help Wanted Index in New England decreased to 37 in July of this year from a high of 57 in the Fall of 2000.

[Table of Mall Vacancies (%)
Nashua, NH 9/98=6%; 9/99=6%; 9/00=0%; 9/01=4% --
Manchester, NH 9/98=6%; 9/99=5%; 9/00=4%; 9/902=4% --
Salem, NH 9/98=3%; 9/99=3%; 9/00=6%; 9/95=7% --
Portsmouth, NH 9/98=9%; 9/99=6%; 9/00=4%; 9/01=6% --
Portland, ME 9/98=7%; 9/99=5%; 19/00=4%; 9/901=5% --
Average 9/98=6.2%; 9/99=5.0%; 19/00=3.6%; 9/901=5.2%]

In the local retail sector, vacancies at regional malls have also jumped compared with the same period last year. Last fall, Northern New England regional mall vacancies averaged 3.6%. As of September of this year (2001), mall vacancies have jumped on average to 5.2% with Manchester and Nashua the lowest at 4%, and Portsmouth, and Salem, NH the highest at 6% and 7% respectively.

The greatest jump in vacancies in the retail sector, however, came from the factory outlet sector in Kittery, ME. Here, a long standing 0%-2% vacancy rate has risen to a never-before-seen 6%.

Steve
Stephen Traub, ASA
Publisher, PVM ^SM

The author, Stephen Traub, ASA, is Chief Commercial Appraiser for Property Valuation Advisors, Newburyport, MA. He is a certified general appraiser in NH, ME and MA. He can be reached at 978-462-4347 or:
by e-mail: straub@shore.net