The commercial real estate industry remained on its recovery path during the fourth quarter of 2012, according to new data released by Los Angeles-based CBRE Group Inc.
In the office sector, CBRE reports that the office vacancy rate declined by 60 basis points (bps) in 2012. In the final quarter of the year, the vacancy rate fell in 38 markets, rose in 19 and remained unchanged in six. The suburbs once again outperformed downtown markets, with a quarterly decline of 20 bps, versus downtowns' decline of 10 bps. The suburban vacancy rate ended the year at 17.1%, 70 bps lower than 2011's year-end rate, while the downtown vacancy rate ended the year at 12.3%, which was 40 bps lower than year-end 2011.
In the apartment market, CBRE finds the pace of expansion in apartment fundamentals has slowed, with the vacancy rate falling 20 bps to 5% at year-end 2012. CBRE says this is ‘markedly below’ the decreases of 140 bps and 80 bps recorded in 2010 and 2011, respectively.
While demand growth slowed during the fourth quarter, CBRE adds the market remained tight by historical standards, with the four-quarter trailing average vacancy rate holding at 4.9%, or 40 bps below the long-term (20-year) norm. Compared to a year ago, vacancy rates declined in 35 of the 63 markets monitored by CBRE.
In the retail sector, CBRE reports that retailers remain wary of taking on substantial amounts of new space, but the slow decline in availability continued, with the rate falling to 12.8% in the fourth quarter, down 30 bps compared to the rate one year ago. A majority of the retail markets recorded either flat or declining availability rates compared to one quarter ago.Â
In the industrial sector, the fourth quarter of 2012, with an availability rate of 12.8%, was the 10th consecutive quarter in which industrial availability has declined. During the past two years, the industrial market has seen a slow but steady decline in availability, which has fallen from 14.6% in 2010. CBRE says the sector's recovery continues to be broad-based, with 40 markets posting declines, 16 showing an increase and five unchanged.
‘The broken record of slow but positive progress toward a real estate recovery continues to repeat,’ says Jon Southard, managing director of CBRE's Econometric Advisors group. ‘The change of note from this persistent trend is the improvement in the industrial sector as shipments are increasing at a faster pace than employment.’