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By Chris Barrett
PBN Staff Writer
PROVIDENCE – The Providence office vacancy rate increased to 21.5 percent at midyear from 17.2 percent at the end of last year, and rental rates continued to fall, CB Richard Ellis-New England said Monday.
The commercial real estate company said 1.3 million square feet of office space stood empty in a city with 6.3 million square feet of offices.
CBRE attributed the jump largely to Blue Cross and Blue Shield of Rhode Island leaving 301,597 square feet of space spread across three downtown buildings. The health insurer moved into its newly constructed headquarters on Exchange Street last year.
As landlords contended with empty offices, rates across all office types continued a slide started in early 2009. CBRE reported the average rental rate was slightly less than $23 per square foot, down from $23.50 last year and almost $24 in 2008.
“The downtown Providence market is experiencing downward compression on asking rents and increased vacancy,” the report said. “Landlords generally have become more aggressive in 2010 primarily with rent structure, larger tenant improvement allowances and free rent.”
There was some movement in the market. Brown University’s decision to convert 222 Richmond Street from rented offices to its new medical school sent tenants looking for about 70,000 square feet of space. The college basketball conference the Big East became the largest relocated office, moving into 32,802 square feet in the Gateway Center next to the Providence Train Station.
Overall, CBRE said the Empire area of Providence had the highest vacancy rate (57.7 percent) with the Westminster section having the lowest (9.3 percent).
Outside of Providence, CBRE said the suburban office vacancy rate fell during the first six months compared with the end of 2009. CB Richard said 22.6 percent of offices in suburban Rhode Island were vacant at the end of June, compared with 25.5 percent at the end of December.
Lease rates also fell to $16.69 a square foot, down from almost $17 at the end of last year and about $17.50 in 2008.
CBRE said the East Bay had the highest vacancy rate (25.9 percent) and Aquidneck Island the lowest (11.3 percent).