FDM
ECONOMIC WATCH
another 598,000 jobs, bringing total
losses since the start of the recession to
3. 6 million. What’s more, half of those
jobs ( 1. 8 million) were lost during
the most recent three-month period
(November, December and January),
pegging the worst three-month job loss
since 1945.
Office vacancy rates, which
measure the percent of office space
available but not leased, are a good
read on the match between supply and
demand. Not surprisingly, those rates
are on the rise, suggesting that supply
is outstripping demand.
In the fourth quarter of 2008, the
downtown office vacancy rate ticked
up to 11. 7 percent from 10. 3 percent
a year earlier. Suburban vacancy
rates, which began to rise earlier than
downtown rates, have climbed to 16. 3
percent, up from 14. 2 percent at the
end of 2007. Downtown rates are now
their highest since the third quarter
of 2006 and suburban rates are higher
than at any time since the first quarter
of 2005.
Stimulus may help
In an effort to better match demand, office construction spending
is expected to pull back 16 percent in
2009 to $61.1 billion. Unfortunately,
with further declines in employment expected during 2009, vacancy
rates are likely to continue climbing
through the year.
The only mitigating
factor facing the office
market today is the
possible benefit from
the federal stimulus
package.
By the end of 2009, the unemployment rate could surpass 9 percent and
may even slip into double-digits for the
first time since June 1983.
The only mitigating factor facing
the office market today is the possible
benefit from the federal stimulus package. While that package won’t directly
help office construction, it is expected
to create three million jobs and prevent other job losses.
That will be an indirect help to the
industry as it provides a floor to job
losses during 2009. More than ever,
this is a year in which we should take
the help wherever we can get it. ●
Kim Kennedy has more than 25 years
of professional experience in construction economics, macroeconomics,
consumer and labor economics. She
writes construction outlook articles in
several industry publications and is a
frequent spokesperson for the construction outlook at industry gatherings and
association meetings.
