RCA in the commercial property press:

Office Aftershocks Forecast for Second Half

National Real Estate Investor reports: With the national office vacancy rate threatening to breach 17% by year’s end and a wave of maturing loans coming due, landlords are working feverishly to clean up their balance sheets and retain tenants.

At this juncture a year ago, owners believed that they would be able to weather the downturn by granting higher tenant improvement allowances and free rent, rather than lowering rents. That scenario never played out.

In the first quarter, the U.S. office vacancy rate climbed to 15.3%, up from a low of 12.5% in the third quarter of 2007. Over the same period, effective rents fell by 3.6%. And by year’s end, Reis projects effective rents will shrink by 8.1%.

“I think when most of us look back on ’08, people were feeling like we were headed into a recession in the first part of the year. But I think everybody felt like it was going to be relatively manageable,” says Charlie Baughn, CEO of the capital markets group at Hines.