According to the National Association of Realtors® quarterly commercial real estate forecast, all of the major commercial real estate sectors are seeing improved fundamentals, but multifamily housing is becoming a landlord’s market commanding bigger rent increases. These trends also are confirmed in NAR’s recent quarterly Commercial Real Estate Market Survey. NAR chief economist, said vacancy rates are improving in all of the major commercial real estate sectors. “Sustained job creation is benefiting commercial real estate sectors by increasing demand for space,” Pellham said. “Vacancy rates are steadily falling. Leasing is on the rise and rents are showing signs of strengthening, especially in the apartment market where rents are rising the fastest.”
“Household formation appears to be rising from pent-up demand,” the NAR said. “The tight apartment market should encourage more apartment construction. Otherwise, rent increases could further accelerate in the near-to-intermediate term.”
The Society of Industrial and Office Realtors® shows a notable gain in its SIOR Commercial Real Estate Index, an attitudinal survey of 297 local market experts.1
The SIOR index, measuring the impact of 10 variables, jumped 8.3 percentage points to 63.8 in the fourth quarter, following a gain of 0.6 percentage point in the third quarter. The index remains well below the level of 100 that represents a balanced marketplace, which was last seen in the third quarter of 2007.
Participants are broadly expecting stronger conditions for the current quarter, with two out of three expecting market improvement.
4 Markets are set to improve in 2012.
Vacancy rates in the office sector are projected to fall from 16.4 percent in the current quarter to 16.0 percent in the first quarter of 2013.
After rising 1.6 percent in 2011, office rents should increase another 1.9 percent this year and 2.4 percent in 2013. 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 forecast at 20.1 million square feet in 2012 and 28.1 million next year.
Industrial vacancy rates are likely to decline from 11.7 percent in the first quarter of this year to 10.9 percent in the first quarter of 2013.
Annual industrial rent is expected to rise 1.8 percent in 2012 and 2.3 percent next year. Net absorption of industrial space nationally is seen at 40.6 million square feet this year and 57.7 million in 2013.
Retail vacancy rates are forecast to decline from 11.9 percent in the current quarter to 11.0 percent in the first quarter of 2013..
Average retail rent should rise 0.7 percent this year and 1.2 percent in 2013. Net absorption of retail space is projected at 9.9 million square feet this year and 23.9 million in 2013.
The apartment rental market – multifamily housing – is likely to see vacancy rates drop from 4.7 percent in the first quarter to 4.5 percent in the first quarter of 2013; multifamily vacancy rates below 5 percent generally are considered a landlord’s market with demand justifying higher rents.
After rising 2.2 percent last year, average apartment rent is expected to increase 3.8 percent in 2012 and another 4.0 percent next year. Multifamily net absorption is forecast at 209,900 units this year and 223,600 in 2013.
Approximately 78,000 NAR and institute affiliate members specialize in commercial brokerage and related services, and an additional 232,000 members offer commercial real estate services as a secondary business.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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