About Last Week…
A couple of readers pointed out to me that last week’s Good News Friday didn’t have any good news, focusing as it did on the disappointing June employment report. In fact, Congress has put debt ceiling negotiations on hold while they investigate whether Good News Friday violated truth-in-advertising rules. Okay, I’m exaggerating, but to forestall any such investigation, I promise that Good News Friday will, henceforth, always focus on good news.
Today, I don’t have to look beyond our own backyard. My colleague Rene Circ, Grubb’s national director of industrial research, and I found the same trend when we crunched our second-quarter numbers. Businesses are leasing office and industrial space at a rate that is surprising in light of the recent, weak economic data. Look for the details later today in our respective First Look office and industrial releases for the second quarter. In short, absorption was stronger and vacancy rates declined more sharply than we had expected. National rent indexes showed little change, but Rene thinks that industrial landlords will have more pricing power in the next few quarters while I am already seeing office rent increases in a few tech-heavy submarkets.
Office and industrial markets take their cue from the economy, which has been moribund lately. But in this case, the behavior of businesses appears to be telling us something important about the economic outlook – that tenants and owner-users feel confident enough in their prospects that they are willing to make multi-year commitments for space. This bottom-line demonstration of business confidence combined with other factors – notably lower energy and input prices and sustained growth in emerging markets – could yield stronger economic expansion in the second half of the year.
Have a great weekend.
SVP, Chief Economist
Grubb & Ellis
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