Report: soaring rents pinch businesses across U.S.

WASHINGTON, July 5 (Xinhua) -- Office rents are skyrocketing across the United States, driving up costs for businesses large and small, thanks to a dearth of space in some major markets and anew breed of deep-pocketed landlords who can afford to hold out for premium tenants, The Wall Street Journal reported Thursday.
Nationwide, effective rents on office properties, the amount tenants pay after concessions, jumped an average of 3.1 percent during this year's second quarter, up from gains of 2.8 percent in the first quarter and 2.1 percent in the year-earlier period, said the report, quoting a report by real-estate research firm Reis Inc..
That was the sharpest quarterly increase since the third quarter of 2000, before the combined effects of the technology-stock bust and the Sept. 11, 2001, terrorist attacks caused office vacancies to rise and rental rates to fall.
The red-hot commercial sector offers a sharp contrast with the housing market, which has been slumping for the past two years or so, the report said.
In some cities, today's higher rents reflect strong economic fundamentals. In New York and Washington, for example, fatter corporate profits are spurring companies to step up hiring, fueling demand for additional space at a time when supply is tight.
In other markets, such as Boston and San Francisco, rising rents are the by-product of a deal-making frenzy that has left large numbers of offices buildings in the hands of nontraditional landlords such as private-equity firm Blackstone Group LP and investment bank Morgan Stanley.
Meanwhile, demand for office space has been growing. Net absorption, a measure of the space taken up by commercial tenants, increased markedly during the latest quarter, a sign that the economy is producing more office jobs, Sam Chandan, chief economist for Reis, was quoted as saying.
Nationwide, the office-vacancy rate, at 12.7 percent, is the lowest since the third quarter of 2001, according to the report.