by Calculated Risk on 1/24/2010 09:24:00 AM

The headline is on the hopeful side, but the story has some details ...

From Roger Vincent at the LA Times: Bottom is near for building owners; recovery is another matter (ht Bill)

Overall office vacancy in the fourth quarter in Los Angeles, Orange, San Bernardino and Riverside counties was 18.5%, a substantial jump from 14.4% a year earlier, according to commercial real estate brokerage Cushman & Wakefield.

"Vacancies are up, and I believe they will continue to go up this year as we have continued job losses," said Joe Vargas, leader of the company's Southern California offices.

And a different kind of "shadow inventory":

Right now, many firms have shrunk but are still renting the same amount of space they had in fatter days. Before they can grow enough to expand into bigger offices, they need to do enough hiring to fill up what they already have.

"All the vacant space out there still doesn't reflect all the jobs that were lost," said Whitley Collins, regional managing director of real estate brokerage Jones Lang LaSalle.

Shadow space, as leased but unused space is often called, is impossible to measure accurately, but there is surely enough of it to slow the commercial real estate comeback. Office leasing growth usually lags behind economic recovery by six to nine months, Collins said. A local office market recovery might be as much as 18 months behind the economy now because of shadow space.

Even if job losses stop, the vacancy rate will probably continue to rise as leases expire and companies downsize. And the current level of vacancies will continue to push down rents as landlords fight for tenants. And of course there will be little investment in new office buildings for some time.