Commercial real estates see moderate growth
According to the National Association of Realtors quarterly commercial real estate forecast, vacancy rates are tightening and rent levels are increasing modestly.
Dr. Lawrence Yun, NAR chief economist, said commercial real estate is on a more moderate growth path. “Office vacancies haven’t declined much because total jobs today are still below that of the pre-recession level in 2007, but rising international trade is boosting demand for warehouse space,” he said.
“Consumer spending has been favorable for the retail market,” Dr. Yun added, “and rising construction is keeping apartment availability fairly even, though at low vacancy levels. That, in turn, is pushing apartment rents to rise twice as fast as broad consumer prices and average wage growth.”
Vacancy rates forecast to decline
NAR reports that national vacancy rates over the coming year are forecast to decline 0.2 percentage point in the office market, 0.6 point in industrial, and 0.6 point for retail, but multifamily is projected to remain the same as that sector has the tightest availability and biggest rent increases.
NAR reports multifamily vacancy rates will edge up only 0.1 percentage point in the next year to 4.0 percent, as construction rises to meet the increased demand, remaining a landlord’s market (which NAR defines as any market experiencing vacancy rates below 5.0 percent).
Average apartment rents are forecast to rise 4.0 percent this year and another 4.0 percent in 2014. Multifamily net absorption is projected to total 266,700 units in 2013 and 259,800 next year.
Retail vacancy rates are forecast to decline from 10.6 percent in the third quarter of this year to 10.0 percent in the third quarter of 2014.
NAR forecasts that average retail rents will increase 1.5 percent in 2013 and 2.3 percent next year. Net absorption of retail space is projected at 11.8 million square feet in 2013 and 18.2 million next year.
Vacancy rates in the office sector are expected to decline from a projected 15.7 percent in the third quarter to 15.5 percent in the third quarter of 2014.
Office rents should increase 2.5 percent this year and 2.8 percent in 2014. Net absorption of office space in the U.S., which includes the leasing of new space coming on the market as well as space in existing properties, is seen at 30.1 million square feet this year and 41.6 million in 2014.
Industrial vacancy rates are likely to fall from 9.3 percent in the third quarter of this year to 8.7 percent in the third quarter of 2014.
Annual industrial rents are expected to rise 2.4 percent this year and 2.6 percent in 2014. Net absorption of industrial space nationally is anticipated at 102.0 million square feet in 2013 and 105.8 million next year.