Demand for commercial property in America has been severely impacted by the loss of thousands of jobs all across the country, with more losses predicted by the end of the year…
The USA has shed a whopping 1.2 million jobs over the last 11 months, letting 533,000 people go in November alone and pushing the US unemployment rate to 6.7 per cent.
The last time figures such as this were seen was back in December 1974, when inflation and economic stagnation were occurring simultaneously (known in industry tech talk as stagflation).
The sheer number of job losses has obviously impacted hard on the US residential property market, and repossessions continue to rise at an alarming rate.
The commercial sector has seen a real slump in demand, with office, retail and hotel space are all being affected.
Heightened pressure on rental and occupancy rates of offices are due largely to the unemployment rate rising – 40 per cent of those who have lost their jobs were office workers.
The major hubs, such as Manhattan, are expected to be amongst the hardest hit as they contain so much office space – Manhattan alone has 395 million square feet.
Much of the office space in Manhattan is taken up by financial companies and, as they have been amongst the worst hit industries in terms of the credit crunch and unemployment, they have given up much of their office space.
The Manhattan office vacancy rate climbed to 7.8 per cent in November from its lowest rate of 5.7 per cent in December 2007, according to Global real estate solutions firm Cushman & Wakefield.
Things aren't looking much healthier in the UK commercial property market sector. Commercial property capital values in the UK dropped by 6.6 per cent in November compared to figures from the previous month, according to new research.
The CB Richard Ellis Monthly Index also revealed that values are around 32 per cent lower than their peak in the middle of 2007, while the figure equates to a 23 per cent drop in the year to date.
Recent figures from the Royal Institution of Chartered Surveyors predicted that property values in the UK sector will fall by a further 25 per cent in the next two years.
Oliver Gilmartin, Senior Economist at RICS, said, "We are only halfway through the price correction in the commercial property market, with values set to fall through 2009 and 2010 as rental declines gather pace.
However, there was one ray of hope for the UK commercial market; "Transaction activity is set to rise, however, as more sellers become willing to accept lower bid prices," added Mr Gilmartin.
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