CRE Vacancies To Peak Near Early 2011

Posted by Orb Staff on May 28, 2010 No Comments
Categories : Commercial Mortgage

y rates for most commercial real estate sectors will continue to grow through the year before plateauing in 2011, the National Association of Realtors (NAR) reports in its latest Commercial Real Estate Outlook report. The lone bright spot, according to NAR, might be multifamily housing, which is expected to benefit from an improving economy and job market. Apartment vacancy rates, which measured about 7.3% in the first quarter of this year, are projected to fall to 6.3% in the first quarter of 2011. ‘The multifamily sector can expect increased demand as the economy creates jobs and new households are formed, likely in the second half of this year,’ says Lawrence Yun, NAR's chief economist. "However, the office, warehouse and retail sectors continue to experience the delayed effects of the recession. These sectors should see gradual improvement after jobs pick up and create additional demand for space, meaning a broader improvement in commercial real estate is likely in 2011." NAR's commercial real estate report suggests that with recent additions to multifamily property supply, average rent is likely to slip 1.5% this year, and then rise 1.2% next year. Multifamily net absorption should be 145,700 units in 59 tracked metro areas this year, and another 214,500 in 2011. The office market is projected to have the commercial sector's highest vacancy rates through the year, increasing from 16.9% in the first quarter of 2010 to 17.6% in the first quarter of 2011. NAR notes that the office sector is seeing an elevated level of sublease space available. Leasing activity in the industrial sector is below historical levels with higher vacancies, more tenant concessions from landlords and a steeper decline in rental rates, NAR says. In addition, obsolete structures remain on the market. Industrial vacancy rates are expected to rise from 14.3% in the first quarter of 2010 to 14.8% in the first quarter of 2011, then decline modestly as the year progresses. Annual industrial rent will probably drop 6.3% this year, and decline another 1.5% in 2011. SOURCE: [link=http://www.realtor.org/press_room/news_releases/2010/05/commercial_peak ]National Association of Realtors

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