The National Association of realtors and CBRE Econometric Advisors joint report on the state of national office occupancy released its analysis of the national and regional markets earlier this week, and Pittsburgh emerged as one of the top five markets

Higher unemployment over the past 18 months has been the primary culprit in the steadily rising vacancy rate, which is now resting at 16.9% as a national average. The vacancy rate continues to exert pressure on rents, which the research found had fallen $2 on average.

The news is not unexpected, and while negative, there is solace in the fact that the vacancy increases are coming almost entirely from the dimished demand for space instead of overbuilding. With the exception of a few markets, office construction was not much ahead of demand as the recession deepened through 2009, and financing was virtually unavailable to build new.

Locally, the news was brighter. The Pittsburgh market vacancy rate declined compared to fourth quarter 2009 and was the fifth lowest in the nation at 11.5%. A low concentration of national financial institutions and the hot energy sector, along with UPMC’s expansion downtown, and very little new construction are keeping vacancy rates low. Because of the character of the offices regionally, the effective rate (meaning the amount of marketable contiguous space) of vacancy is even lower. In several key submarkets – Cranberry, Oakland, Southpointe – there is almost no vacant office space, and what is vacant is still under construction and leasing quickly.

While this is good news for the region, the downside is that with financial markets still stalled, and with little presence of national developers, a growing number of office end-users are finding it difficult to shop for space. There are several medium sized build-to-suit opportunities that could be lost because the developers may not want to accept borrowing conditions as they currently exist. It’s not the worst problem to have but it’s a problem nonetheless.