by Calculated Risk on 12/08/2010 08:54:00 PM

According to Reis, the office vacancy rate hit a 17 year high in Q3, but the rate of increase has slowed.

Today CB Richard Ellis released a forecast for the office market: U.S. Office Real Estate Vacancy Rate expected to decline modestly in 2011

CBRE-EA forecasts that the office vacancy rate will peak in 2Q2011 at 16.8%, up from the 16.6% level at 3Q2010. ... The U.S. office market vacancy rate is expected to slowly decline over the next two years, falling to 16.4% by the end of 2011 and to 15.3% by the end of 2012 ...

“The recent increase in leasing is a step in the right direction but activity is uneven across markets and generally tenant footprints are not increasing,” said Arthur Jones, Senior Economist, CBRE-EA. “Since office space is the "economy in a box", continued job growth is key to the market‟s ongoing recovery.”

... the recovery will take longer to gain traction in depressed housing markets such as California and Arizona ...

“While vacancy is starting to improve, the high levels indicate that the rent recovery will be measured in terms of years,” said Mr. Jones. “The process will take time and the outlook over the next year will remain subdued with little upward movement in rent.”

This forecast sounds about right. It appears leasing has started to increase a little, and investment in office structures is at a record low as percent of GDP - so the office vacancy rate will probably peak soon.

However, with the vacancy rate near 17%, it will be some time before there is an increase in new office investment (and the associated construction jobs).