Commercial real estate markets stabilizing
According to the National Association of Realtors’ (NAR) forecast, real estate markets are stabilizing and demand is growing due to “the improving economy and job creation.” NAR forecasts that between now and the second quarter of 2012, vacancy rates will decline 1.0% in the office sector, 0.9% in industrial, 0.5% in retail and 1.1% in multifamily.
The Society of Industrial and Office Realtors (SIOR) surveyed with similar results showing a “firming up of market fundamentals.”
Lawrence Yun, NAR chief economist, said job creation will be the biggest factor moving forward. “Job growth creates demand for commercial space, and the economy should be adding between 1.5 million and 2 million jobs annually both this year and in 2012, with the unemployment rate falling to 8.0 percent by the end of next year.”
Yun’s optimistic view of the commercial sector opposes his somber tone regarding residential. “Given the minimal new supply in recent years, the rising demand means vacancy rates will be trending down in the commercial real estate sectors. Individual markets are now stabilizing and in some cases rising.”
- 65% of Realtors report lending conditions tightened in 2011.
- “Just as in the residential sector, lending problems are the biggest issue impacting commercial real estate,” Yun said.
- “Solid rises in apartment rents will force some renters to consider home ownership,” Yun noted.
- Vacancy rates in the office sector are expected to fall from 16.3% in Q2 2011 to 15.3% in Q2 2012 and rents are forecast to rise 0.3% in 2011 and 4.3% in 2012.
- Honolulu and NYC have the lowest office vacancy rates (below 9% each).
- Industrial vacancies are said to drop 0.9% over the next year to 13.0%. Rents should drop 1.5% in 2011 but rise 2% in 2012.
- LA and Salt Lake Cities have the lowest industrial vacancy rates at 7 to 8%.
- Retail vacancies should drop from 0.5% over the next year and rent is projected to drop 1.4% in 2011 and rise 0.7% in 2012.
- With vacancies under 8%, Honolulu, San Jose and Long Island have the lowest retail vacancy rates.
- Multifamily vacancies should drop from 5.8% nationally to 4.7% by Q2 2012 and rents should rise 3.4% in 2011 then 4.3% in 2012.
- San Jose, Portland and Pittsburgh have the lowest multifamily vacancy rates around 3%.
Click here for the full NAR forecast report.