Office
NYC has 13M SF office under construction and only 34% preleased
LA has 4M SF office under construction and only 20% preleased
ATL has 3.2M SF office under construction and only 9% preleased
Long Island has 1.6M SF office under construction and only 6% preleased

Nationwide, YTD there has been -15M SF of Class A office absorption. That is 15M SF of Class A office space that has gone vacant. -3.6M of that negative absorption has been in NYC, -2.7M in Chicago, and -2.6M in LA.
For total office space (Class A, B, & C), YTD there has been -43.5M SF of absorption. -6.5M in Chicago, -4.8M in NYC, -1.6M in Atlanta.

Why am I not a bit surprised about this news of Crescent Resource's problems?

Crescent Resources is currently struggling along with the rest of the nation’s commercial real estate market, saddled with $1.4 billion in debt and facing possible bankruptcy, according to the Charlotte Observer. The developer of multifamily and office properties expanded into booming states in the Southeast and Southwest that were later hit hard by the market downturn. [GlobeSt. Top Stories]

I wrote a couple of days ago about the 2,000,000 SF of office space under construction in the Buckhead submarket of Atlanta. A couple of years ago, Cousins Properties delivered Terminus 100 at the corner of Peachtree & Piedmont. This project began an exodus of many firms from surrounding Class A properties like Atlanta Financial Center and Monarch Tower. At that point back in 2007, all numbers (vacancy rates and absorption) indicated rising vacancy rates of up to 20% or more.

In looking at absorption numbers for the industrial market in Atlanta, I am struck by the continued negative absorption numbers for multiple quarters.

• 2008 Q2: -1.2M SF absorption
• 2008 Q3: -.5M SF absorption
• 2008 Q4: -1.7M SF absorption
• 2009 Q1: -1.9M SF absorption

That's almost -5M SF of absorption over the past year with rising vacancy rates. Kudos to Atlanta industrial developers for cutting off the supply engine almost completely - there is less than 100K SF of industrial space under construction in Atlanta.

In looking at the current office construction activity throughout the U.S., a number of things jump out at me:

• Atlanta has just over 4,000,000 SF under construction with only 15% preleased. Drilling into the data shows me that 2,000,000 SF of that is in five buildings in the Buckhead submarket where under 2% has been preleased. This is a recipe for disaster.
• Seattle has over 6,000,000 SF of office space under construction, which seems inordinately high considering the size of Seattle.
• NYC has almost 13,000,000 SF under construction and is only 36% preleased. With the continuing troubles in the financial sector, I wonder how many of those leases will hold.

Interesting article in the AJC today about office space:

Leasing demand for office space in metro Atlanta was dismal in the first quarter of 2009, and the situation will grow worse as new office towers in Buckhead and Midtown open in an already glutted market, analysts said Thursday.

“Mostly what we’re seeing is renewals, no new leasing,” said Scott Amoson, director of research for Atlanta-based Colliers Spectrum Cauble, a commercial real estate brokerage firm. “Companies looking to pull the trigger on new deals are waiting until the market gets into a better position. Right now, it’s an oxymoron, since they could get good deals.”

Metro Atlanta’s overall 17 percent office vacancy rate was basically flat from the end of last year. But it is up 1.1 percent compared with the same quarter last year, according to the first-quarter 2009 Market Report released Thursday by Colliers.

A full office market recovery for metro Atlanta won’t begin until early 2010, although leasing activity is expected to pick up by the end of this year, Colliers reported.

Complete article here...

I still can't get over the dire situation in Buckhead, with almost 2M SF about to deliver. Even in the best of times did we see Buckhead able to absorb that kind of volume?