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As mortgage interest rates continue to rise and banks tighten their lending standards, many potential first-time home buyers are finding themselves priced out of the market. This, in turn, is pushing many young people into multifamily housing, where vacancy rates have been tightening for the past several years, due to economic conditions.

Developers have so far been able to keep up with the increased demand for multifamily housing, but only just barely. According to the National Association of Realtors' (NAR) real estate forecast, the apartment rental market will see vacancy rates edge up only 0.1 percentage point from 3.9% in the third quarter of this year to 4% in the third quarter of 2014, despite the fact that developers are building more apartments. The NAR notes that vacancy rates below 5% are considered a "landlord’s market" where demand justifies higher rent.

As such, the NAR is forecasting that apartment rents will increase about 4% in the second half of this year and by another 4% by the end of 2014.

“Rising construction is keeping apartment availability fairly even, though at low vacancy levels," says Lawrence Yun, chief economist for the NAR, in a release. "That, in turn, is pushing apartment rents to rise twice as fast as broad consumer prices and average wage growth."

Areas with the lowest multifamily vacancy rates currently are New Haven, Conn., at 1.9%; Syracuse, N.Y., at 2%; New York City and San Diego, at 2.1% each; and Minneapolis, at 2.2%.

Meanwhile, vacancy rates in the office sector are expected to decline from a projected 15.7% in the third quarter to 15.5% in the third quarter of 2014.

Metro areas with the lowest office vacancy rates in the third quarter are Washington D.C., with a vacancy rate of 9.7%; New York City, at 9.8%; Little Rock, Ark., 12.1%; and Birmingham, Ala., 12.4%.

The NAR forecasts that office rents will increase 2.5% this year and 2.8% 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 forecast to fall from 9.3% in the third quarter of this year to 8.7% in the third quarter of 2014.

Metro areas with the lowest industrial vacancy rates currently are Orange County, Calif., with a vacancy rate of 3.8%; Los Angeles, 4%; Miami, 5.9%; and Seattle, 6.4%.

Annual industrial rents are expected to rise 2.4% this year and 2.6% in 2014. Net absorption of industrial space nationally is anticipated at 102.0 million square feet in 2013 and 105.8 million next year.

"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,” Yun says.

Retail vacancy rates are forecast to decline from 10.6% in the third quarter of this year to 10% in the third quarter of 2014. "Consumer spending has been favorable for the retail market," Yun notes.

This has been particularly true for more affluent areas: Presently, markets with the lowest retail vacancy rates include San Francisco, 3.9%; Fairfield County, Conn., at 4.1%; Long Island, N.Y., 5%; and Orange County, Calif., at 5.5%.

Average retail rents are forecast to increase 1.5% this year and 2.3% in 2014.  Net absorption of retail space is projected at 11.8 million square feet in 2013 and 18.2 million next year, according to the NAR.

Yun notes that, overall, commercial real estate is on a "moderate" growth path for the remainder of this year.

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