Many U.S. office markets will experience lower than expected employment growth in 2005, predicts a new report from Merrill Lynch. The report is based on statistics derived from Economy.com that project lackluster growth in 24 of the 28 office markets that Merrill Lynch actively monitors.

There is some good news, however: The job growth estimates for the remainder of 2004 have been raised. Economy.com in August projected that a total of 234,000 new office-using jobs would be created in 2004 across the 28 markets. Now Economy.com data projects that 246,000 new jobs will be created — a net increase of 12,000 jobs over the original forecast.

The markets that experienced the largest upward revisions to their projected office employment in 2004 were St. Louis; Portland, Ore.; Westchester County, N.Y.; San Francisco and Denver. Conversely, Chicago, Central New Jersey and Tampa-St. Petersburg, Fla., experienced the largest downward revisions to their projected office employment growth this year.

As a result, Merrill Lynch advises investors to take "a cautious stance on the office markets." Since many companies do not need new office space to house their new hires, leasing growth will be hampered. In a corporate survey conducted by Merrill Lynch in June, only 13% of respondents said they would need more office space in 2004 or 2005 to accommodate new hires.