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By Knight Kiplinger

The Kiplinger Washington Editors

Jan. 2, 2009

2009: A Rough Start
But a Better Finish

The recession will be painful through the first six months of the new year, but a recovery will start in the second half. This week�s Kiplinger Letter looks at the pluses and minuses of the economic picture and explains how you can tell when an improvement is close.

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Plan on Paying More for Office Space

Tom DeLay and company will cheer the decision backing the remapping of Texas congressional districts, but Democrats may have the last laugh.

By Peter Goldstein, Senior Economics Editor, The Kiplinger Letter

June 28, 2006

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Strong Growth in Apartment Rents (6/23/06)

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The pace of hikes in office rental rates will cool only slightly in coming months as slower employment growth tempers demand for work space. Nationwide, we expect to see the average rent go up about 5% over the next 12 months, compared with a 6% gain since last June.

But in cities boasting consistently strong employment growth, including New York, Los Angeles, Miami, Phoenix and Washington, D.C., landlords will be luckier, demanding and getting rent increases in the upper single digits. At the low end of the spectrum, cutbacks by automakers and their suppliers will boost the supply of empty offices in Detroit and other Upper Midwest cities. Already, Detroit's vacancy rate of slightly above 20% is the highest in North America.

Investment in new and existing office space is on track to grow by about $10 billion this year to $111 billion before decelerating next year. High prices for building materials such as steel and cement, as well as tight supplies of skilled labor for carpentry and other tasks, will lead to cancellations and scaled-down redesigns of many office projects. But interest in existing office buildings is likely to remain fairly brisk as pension funds, wealthy individuals and foreign investors continue to view the U.S. commercial property sector as a solid long-term buy.

The pullback in new building will probably keep the slowdown in rental increases from snowballing in the years ahead, despite easing economic growth. Nationally, existing office space is renting out—that is, coming off the market—faster than new supplies are coming on the market. Robust absorption rates in Chicago, Houston, Dallas and Atlanta suggest that rent gains in these areas will ease more slowly than elsewhere.

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