Bottom of the office market predicted: 18.6% vacancy next year

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Vacancy will continue to grow in the country’s troubled office market until some time year, but the bottom won’t be as bad for landlords as it was in 1990, an industry researcher said today.

Several experts have predicted that 2010 would be the bottom for the office market in this real estate cycle, but CBRE Econometric Advisors went a step further and called the exact low mark: 18.6% average vacancy. That’s just short of the depth of the last downturn 19 years ago, when vacancy peaked at a record-setting 19.3%.

Don’t expect to the market to start zooming up after it hits the bottom, though.

‘While there are signs of improvement in the economy, it is unlikely that the job market will bounce back in such a way that commercial real estate fundamentals will quickly turn around,’ said Arthur Jones, CBRE’s senior economist. ‘The bottom may be coming into sight but there will be no quick return to glory days for the market.’

Office rentals are a lagging indicator of the economy, so vacancy won’t start going down again until businesses start hiring new employees. Expansion should finally begin in 2011, Jones said.

Average third-quarter vacancy in Los Angeles, Orange, San Bernardino and Riverside counties was 17.5%.

--Roger Vincent