Vacancies decline in premium office space in first half of 2012
DOWNTOWN PROVIDENCE office vacancies declined in the first half of 2012, CB Richard Ellis New England said in its mid-year report, adding that the impending vacancies in both One Empire Plaza and 111 Westminster Street were not included in the report.
PROVIDENCE – Downtown Providence office vacancies declined in the first half of 2012, leading to higher asking rents, but impending vacancies in large Class B buildings cast some uncertainty over the market, CB Richard Ellis New England said in its mid-year report.
Leases in premium downtown buildings were strong in the first half of the year, with 71,957 feet of Class A office space absorbed and the vacancy rate dropping to a four-year low of 11.28 percent from 15.04 percent at the end of 2011.
The average asking Class A rent remained at $30.05 per square foot, the same as the end of 2011, but the report predicted landlords for premium buildings will begin conceding less in the second half of the year as a result of the decline in vacancies.
The strength in the Class A market was somewhat canceled out in the Class B market, where the vacancy rate rose to 15.03 percent from $14.54 per square foot at the end of 2011, according to the report.
In addition, two large impending vacancies – the departure of Bank of America from 111 Westminster St. and 38 Studios from 1 Empire Plaza – promise to dump additional space on the market.
“Some events that occurred in the first half of 2012, particularly in the Class B market, will likely cause some setbacks, while that is balanced by some outcomes in the Class A market to keep the market relatively stable,” CB Richard Ellis New England Senior Vice President and Partner Alden Anderson Jr. told Providence Business News.
Although 38 Studios is bankrupt, One Empire Plaza is not counted as vacant in the report because the lease for the space is still in effect.
How the 320,000 square-feet of space in the Bank of America building is repositioned in the market, “will define the Westminster Street corridor in coming years,” the report said.
Overall Class B rents rose slightly to $20.82 per square foot in the first half of the year from $20.28 per square foot at the end of last year.
The vacancy in the Class C downtown market rose from 27.22 percent at the end of 2011 to 29.29 percent in the first half of 2012. Class C lease rates rose slightly from $17.12 per square foot at the end of 2011 to $17.40 per square foot in the first half of 2012.
Downtown office space absorption was greatest in the Financial District at 23,784 square feet and the Capital Center at 21,255 square feet.
In the suburban market, the vacancy rate dropped slightly to 22.06 percent in the first half of this year from 22.2 percent at the end of 2011.
This was driven by the absorption of 86,628 square feet of space in the West Bay. The rest of the suburban submarkets saw negative absorption.
“The West Bay submarket had seen the majority of deal flow with landlords in northern Rhode Island, the East Bay and suburban Providence seeing less activity and robust competition for the limited pool of prospects,” the report said.
The report predicted the second half of 2012 to have similar demand for space in the suburban market with “sporadic leasing activity.”