AS IF ON CUE, the e-mail popped onto my computer screen just as I was wrapping up my story on the ailing office market for the June issue. The subject line: “BellSouth to eliminate 4,000 to 5,000 jobs.” The note was from Tony Wilbert, my friend and real estate reporter for the The Atlanta-Journal Constitution. Tony sends out dailyblasts to his real estate readers, and this one was of particular interest to me.
I had just spent the better part of two weeks interviewing industry experts about the cause and effect of the ballooning office vacancy rate, which registers between 14% and 16% nationally and is still climbing. In the case of BellSouth, the workforce reduction will occur in a nine-state region over the next four months but is expected to hit hardest in Atlanta, where the majority of the company's 85,740 employees work. The telecommunications giant says the cutbacks will affect both management and non-management positions.
The announcement is all too familiar in Corporate America today. In order to demonstrate profitability to Wall Street, BellSouth and other publicly traded companies are continuing to shed costs, even as economists say the signs of recovery are evident. Industry experts estimate that for every service sector job created, there is an associated demand of about 200 sq. ft. to 300 sq. ft. of office space. Unfortunately, the employment numbers have been contracting, not expanding. Since March 2001, the economy has lost 1.4 million jobs.
The end result is a pronounced lack of demand for office space as reflected in the negative net absorption numbers illustrated in the accompanying. And wherever volatility exists, there is opportunity. Among the winners are tenants in Class-B space who have opted to take advantage of the lower rental rates by upgrading to Class-A space.
The one question on everyone's mind is how long the office slump will last. “It's a recession that in some respects is more in line with the new high-speed economy,” says Maria Sicola, senior managing director of research for New York-based Cushman & Wakefield. “It's going to be a recession that we emerge from quickly, and we'll see our markets begin to turn around in 2003.”
Time will tell. I'll know for certain that the office market has recovered when I begin to receive daily e-mail blasts announcing new job hires.