Jones Lang LaSalle


Rent Averages for Commercial Properties Grew in 2005, Report Shows
February 13, 2006
By Peggy Bresnick Kendler, Contributing Editor

Daniel O'Connor
Last year, national rent averages for commercial properties continued to grow in the U.S., with every major sector reporting a healthy recovery from the weak performance of rents in 2004, according to Global Real Analytics' national real estate index rent monitor report for the fourth quarter 2005.

For the third and fourth quarters of 2005, commercial rents showed increasing acceleration and momentum with annualized rates. All major property categories indicated continued increases in effective rents. Most showed a substantial decrease in concessions to tenants.

Daniel O'Connor, managing director of global forecasting and research for Global Real Analytics, said that the turn in commercial rents in 2005 was the result of a recovery in the job market in the United States and of very muted development in most commercial property categories. "As long as those conditions continue, the results that we saw in the latter half of 2005 in particular will continue," he told CPN this morning. "In most quarters, far more space was absorbed in each quarter than was developed, in the industrial, office and lodging sectors. As long as those conditions continue, then 2006 will shape up to be a good recovery year for the property fundamentals."

Among the report's other findings, Florida and the West bolstered national rent averages for 2005. Nationwide, the warehouse sector reported a quarterly increase of 1.4 percent in the fourth quarter of 2005. For the year, this sector showed a 5 percent increase. Although all regions of the country reported strong gains in the warehouse sector, the Pacific-Southwest region's average of 9.5 percent gain boosted the national annual averages.

Retail rents continued to climb in the fourth quarter, evidenced by a 1.3 percent national increase which contributed to an annualized rent increase rate of 5.3 percent. Honolulu led all markets for annual retail rent increases in 2005, with a 13 percent rise in rent. Suburban office rents also increased 1.1 percent in the fourth quarter 2005 over the previous quarter. In this sector, landlords also pulled back rent concessions by 30 percent nationwide in 2005.