The 4.7-million-square-foot Lexington general purpose, multi-tenant office market saw some occupancy improvement in the second quarter. Reis reports the second quarter vacancy at 16.1%, down 40 basis points from both the prior quarter and from 12 months earlier. First Glance data from Reis show a decline to 16.0% per third quarter. Vacancy here has been in the double-digit range since at least 2000, according to Reis data. Class A vacancy is recorded at 13.7%, down 20 basis points from the prior quarter, and Class B/C vacancy at 19.3%, actually down 70 basis points over the quarter. The construction total for 2002 to 2011 was 387,000 square feet, while the net absorption total for that time span was low but positive at 110,000 square feet. Most of the construction was at the beginning of that time span, while net absorption varied substantially from positive to negative annual totals. There are no general purpose projects planned or under construction, according to Reis’ latest construction data.
Reis reports average asking and effective rents of $17.09 psf and $13.37 psf, both up 0.2% over the quarter. Both measures managed gains of 1.3% and 1.5%, respectively, over 12 months. First Glance data from Reis put the third quarter asking rent at $17.09 psf. Reis reports Class asking rents at $18.52 psf, up 0.2% over the quarter, and Class B/C rents at $15.20 psf, up 0.6%. After minimal gains in the 1.0% range in 2012, Reis forecasts effective rents to post a gain of 3.0% by 2014.
In its mid-year 2012 report, NAI Isaac gives a suburban office vacancy rate of 13.93%, and a CBD vacancy rate of 15.09%; NAI notes “The bulk of the suburban office market is comprised of 130 Class B buildings, representing over 645,000 square feet available space. While the Lexington CBD office market is composed of few Class A buildings, the total square footage is nearly the same as the Class B category.”