For example, a business journal or real estate industry publication may report that "recent deals in midtown Manhattan are being signed at an average lease rate of $40 per square foot." Technically, this may be true. If you were to look at one these leases it will show a rate of $40 per square foot. But when you look at the fine print of the lease you'll find that the landlord has included all kinds of clauses and give-backs to the tenant that effectively reduce the lease rate -- sometimes substantially. If you sign a lease for $40 per square foot and the lease includes three "free" months per year for the duration of the lease, then you aren't paying $40 per square foot -- you're paying $30.
Wow, so many informed posts!
Absolutely true. Vacancy data can be incredibly misleading. For example, in one property market, a major bank moved out of the downtown leaving an entire building and numerous floors in other office building vacant. Yet, they still paid their lease payments. Hence, the empty building was reported as 0% vacancy!
And these markets have numerous incidents of "free rent" which does not appear in the vacancy data.
Finally, the accuracy of reporting has improved, but is no where near where it should. Heck, we can't even get Fannie Mae and Freddie Mac to divulge any information ... and they are government sponsored enterprises! What is the chance that we can get private market entities to behave themselves!