- June 1, 2013: Vol. 25, Number 6

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AWOL: The economy is coming back, but the people who populate office space are not

by Susan Fornoff


Through the uncertainty of the Great Recession, the turbulence of the financial markets and the agony of a slow recovery, economists and investment managers waited out what they thought would be a predictable cycle for office real estate.

It happens like this: The economy slumps and businesses that have sliced staff cannot dice their real estate because either they own it or they signed 10-year leases. So the square footage per worker spikes even while vacancy rates begin to rise because some businesses close down.

Then, even as the economic recovery gains momentum, vacancy rates stay high but square footage per worker drops as new employees fill the surplus “shadow space” that had gone unoccupied during the recession. Finally, vacancy rates start to drop, rents start to rise, office building construction booms, and all is well in the world of work.

But in the final quarter of 2012 and first quarter of 2013, relief remained AWOL. Vacancy rates

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