Question

PLEASE SHOW STEPS IN EXCEL

5. Small City currently has 1 million square feet of office space, of which 900,000 square feet is occupied by 3,000 employees who are mainly involved in professional services such as finance, insurance, and real estate. Small City's economy has been fairly strong in recent years, but employment growth is expected to be somewhat lower during the next few years, with projections of an increase of just 100 additional employees per year for the next three years. The amount of space per employee is expected to remain the same. However, a new 50,000 square-foot office building was started before the recession and its space is expected to become available at the end of the current year (one year from now). No more space is expected to become available after that for quite some time. a. What is the current occupancy rate for office space in Small City? b. How much office space will be absorbed each year for the next three years? c. What will the occupancy rate be at the end of each of the next three years? d. Based on the above analysis, do you think it is more likely that office rental rates will rise or fall over the next three years?

Answer 1

For part 1 2 & 3 refer the photo.

& Pace accupied Avai lable epace Ocupancy Rate a00 000 000, 000 Oftice epace abcorbed each ear 2- Rate 900000 ea.ft 3coo enployeas 300 S4 ft/euplayee 1 12 year SpEE GEOUP NO OeMpO3100 320DA Space oadpi 33 ao 990.000 460000 430,000 office epace absorbed pace 420,000 460,000 990.000 3 New opace is available at urend for uce in ie 2& mwards ear pa ce feq Auail Rate 960,000 10 50, 000 91.439 aa0.000 1050,000 930.000 1000,000 93% 94.29

4. Impact on rent:

In year the rent will increase from current level as the occupancy rate is increasing. However it shall fall in year 2 as more space is available for use and occupancy rate is falling further. But in subsequent years the rent shall again start increasing.

Another impact on rent shall be based on economic scenario which is not favorable leading to fall in rent.