Falling Commercial Rents

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Boxwood Means released their national rent study:

Rents at small industrial and office properties continued to fall last month, according to Boxwood Means Inc.

But the rate of decline has not increased, according to the Stamford, Conn., research company that specializes in small-capitalization properties. And that could signal that the market might be close to reaching its cyclical bottom.

Rents at office properties with less than 50,000 square feet, for instance, fell by 27 basis points in May to $18.21/sf, while at industrial properties, they fell 61 bp to $7.63/sf. Those rates of decline are similar to the drops in previous months. On a relative basis, that’s good news.

Nonetheless, rents have fallen at industrial properties for 18 months straight and at office properties for 12 months. Small office properties generally do not rely on the financial or professional services sectors for tenants.

Larger-cap properties, meanwhile, have suffered greater declines in rent. According to Reis Inc., national office rents fell by 4.1 percent in the first quarter, to $24.08/sf, from their peak in the second quarter of 2008. During the same period, rents at small-cap companies fell by only 1.67 percent, to $18.31/sf.

Boxwood Means compiles property-level operating and sales data on small-cap properties through a partnership with LoopNet Inc.

Click here for the full report at: Commercial Real Estate News.