Got an early peek this morning at the forthcoming office market report from ReisReports. Like everything else in the economy today (except apartments), the operative word is “sluggish.” Indeed, even in the bullish apartment market, the core driver is the sluggish economy turning “owners” into “renters.”

On the surface, the facts aren’t all that bad. Office vacancy rates topped out above 17.5% in mid-2010 and have been on a slow trend downward. However, for the last two quarters, the rate has stalled at 17.2%. Quarterly absorptions have been in positive territory since early 2011, totaling about 4 million square feet nationally in the 2nd quarter 2012, even in the face of the lowest office completions level since REIS began tracking data in 1999. Rents remain at 2007 levels, with 0.3% gains in both asking and effective averages.

The reasons are obvious—continued fears from Europe (which may be abating, given very recent pronouncements from European central bankers), the close presidential election, and the very real fear of of the “fiscal cliff” in early 2013 contribute to an anemic jobs recovery. Without new jobs, there is no demand for office space. You do the math.

In most American cities, the stark reality on the skyline is the absence of high-rise cranes. Given the very long pipeline for office construction, coupled with the difficulty of obtaining financing in this sector, and it may be many years before we see this market turn fully around.

 – John Kilpatrick