The United States is not alone in its oversupply of office buildings.
According to Spaulding & Slye Colliers, an international real estate brokerage firm based in Boston, rents in some cities around the world are declining just as they have in the United States because the pace of construction has outpaced demand.
In London, rents in prime downtown office buildings have declined almost 20 percent in British pounds in the past year, to an equivalent of about $192 per square foot per year.
Other areas where optimistic expectations outstripped real growth are Hong Kong, Australia and New Zealand.
Even rents in Tokyo have flattened in local terms, although they are higher in U.S. currency than they were one year ago because of the weakening of the dollar. Rents there are the most expensive in the world at about $214 a square foot, or more than five times the rate in the District of Columbia.
"Oversupplied markets are typical of the cyclical nature of the real estate business," said Thomas G. Owens, senior vice president of Spaulding & Slye, in a published statement that accompanied the report. "What is unusual is to have such conditions at a time when world demand is slackening and several economies border on the brink of recession."
The strongest markets in the world are a few Pacific Rim cities, including Kuala Lumpur, Singapore and Bangkok, and Europe's financial centers, according to Spaulding & Slye. In Frankfurt, rents climbed more than 20 percent in one year. Rents in Madrid have risen to the second highest in Europe at $68 per square foot.
In the United States, Chicago has the highest rents for prime office space, slipping ahead of Midtown Manhattan and the District. Chicago has been buoyed by the same forces affecting the region, including a growth in exports fueled by the weakening dollar and an increase in foreign investment as manufacturers based overseas open U.S. production facilities, according to Spaulding & Slye. Rents in Chicago are at $41 a square foot per year, according to the survey.
Rents in the District are neck-and-neck with Midtown Manhattan as the second-highest-priced markets. In both cities, prime office space now rents for about $40 a square foot.
In the Washington area, the pace of construction has slowed noticeably in the past year, according to a recent report by a second real estate brokerage, Smithy Braedon Co.
Smithy Braedon said the amount of "speculative" construction, or office projects built without specific tenants in mind, fell dramatically in the past year. There are 7.8 million square feet of space in 40 projects under construction, down from 16.1 million square feet in 89 projects one year ago.
Net absorption, which is real market growth as determined by the net change in the amount of occupied space in the Washington area, was about 4.1 million square feet in 1990, Smithy Braedon reported.
"While these numbers substantiate earlier projections of a slowing in the area's rapid rate of growth, they also confirm that the region remains one of the strongest office markets in the country," said James L. Eichberg, president of Smithy Braedon.