WASHINGTON (MNI) – The following is the text of a statement by the National
Association of Realtors Monday:
Most of the major commercial real estate sectors show gradually improving
fundamentals and are easily absorbing the relatively small amount of new space
that is coming online, with a full recovery already in the multifamily market,
according to the National Association of Realtors quarterly commercial real
estate forecast.
Lawrence Yun, NAR chief economist, said the market has been slowly building
momentum. “Job creation is the key to increasing demand in the commercial real
estate sectors,” he said. “The economy is expected to grow 2.5 percent next
year, and with modest job creation, assuming there is no fiscal cliff, the
demand for commercial space will gradually rise. The greatest friction that
remains is a tight credit environment, notably for smaller properties.”
Vacancy rates over the next four quarters are forecast to decline 1.0
percentage point in the office market, 0.6 point in industrial, 0.2 point for
retail and 0.1 point in multifamily; however, multifamily has the tightest
availability and is experiencing the strongest rent increases, well above the
rate of inflation.
“The primary factor holding back greater job creation has been uncertainty
over regulations and associated costs,” Yun said. “With the elections behind us
and Washington apparently resolved to prevent a fiscal cliff, it’s hoped that
ambiguity over regulatory issues will clear relatively soon so employers can
understand the rules of the game and the layout of the field.”
NAR’s latest Commercial Real Estate Outlook1 offers projections for four
major commercial sectors and analyzes quarterly data in the office, industrial,
retail and multifamily markets. Historic data for metro areas were provided by
REIS, Inc.,2 a source of commercial real estate performance information.
Office Markets
Vacancy rates in the office sector are projected to fall from an estimated
16.7 percent in the fourth quarter to 15.7 percent in the fourth quarter of
2013.
The markets with the lowest office vacancy rates presently (in the fourth
quarter) are Washington, D.C., with a vacancy rate of 9.6 percent; New York
City, at 10.1 percent; and New Orleans, 12.9 percent.
Office rent is expected to increase 2.0 percent this year and 2.5 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
likely to total 21.7 million square feet in 2012 and 49.0 million next year.
Industrial Markets
Industrial vacancy rates should decline from 10.1 percent in the fourth
quarter of this year to 9.5 percent in the fourth quarter of 2013.
The areas with the lowest industrial vacancy rates currently are Orange
County, Calif., with a vacancy rate of 4.3 percent; Los Angeles, 4.4 percent;
and Miami at 6.5 percent.
Annual industrial rent is forecast to rise 1.7 percent in 2012 and 2.2
percent next year. Net absorption of industrial space nationally will probably
total 93.4 million square feet this year and 89.6 million in 2013.
Retail Markets
Retail vacancy rates are expected to ease from 10.8 percent in the fourth
quarter to 10.6 percent in the fourth quarter of 2013.
Presently, markets with the lowest retail vacancy rates include San
Francisco and Fairfield County, Conn., both at 3.9 percent; Long Island, N.Y.,
5.1 percent; and Orange County, Calif., 5.4 percent.
Average retail rent should increase 0.8 percent this year and 1.4 percent
in 2013. Net absorption of retail space is estimated to be 9.1 million square
feet this year and 19.8 million in 2013.
Multifamily Markets
The apartment rental market – multifamily housing – is projected to see
vacancy rates decline from 4.0 percent in the fourth quarter to 3.9 percent in
the fourth quarter of 2013; vacancy rates below 5 percent are considered a
landlord’s market with demand justifying higher rents.
Areas with the lowest multifamily vacancy rates currently are Portland,
Ore., at 2.1 percent; New York City, 2.2 percent; and Minneapolis, 2.3 percent.
Average apartment rent should increase 4.1 percent in 2012 and another 4.6
percent next year. Multifamily net absorption is likely to be 219,700 units this
year and 234,600 in 2013.
** MNI Washington Bureau: 202-371-2121 **
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